Trustees should give members who invoke family law payment splits appropriate information so they can make informed decisions of what to do next. This is especially so when the member's defined benefit (DB) interest can be reduced by interest added to the family law offset account balance.
The member agreed to a family law payment split of his DB interest and the court order was handed to the trustee in early 2012. The trustee paid the relevant amount to the member's former spouse and, in February 2012, wrote to him about the payment. This letter did not advise the member that his DB interest would be reduced by interest on the amount paid to his former spouse at the three year average rate of the fund. It also failed to advise him of his ability to transfer his DB interest to the accumulation division of the fund if the employer and trustee so agreed. Another letter was sent to the member in May 2012 which referred to the amount paid to his former spouse and that his DB would be reduced. He was also aware of information contained in a family law fact sheet, the product disclosure statement and his annual statements.
In July 2014, the member noticed his DB interest was reducing and he phoned the trustee who explained the effect of the interest being added to the amount paid out under the payment split. On obtaining this knowledge, the member decided, in February 2015, to transfer his remaining DB to the fund's accumulation division to which his employer would contribute 10 per cent of salary going forward.
The member argued that the collective correspondence from the trustee did not adequately equip him with the information he needed to make an informed financial decision. He wanted the trustee to compensate him and the trustee's refusal to do so, in the manner he so wished, was the subject of the complaint before the Tribunal.
The Tribunal found the member was not adequately informed in 2012 about the operation of the family law offset account and his ability to manage the existence of this debt by transferring to the accumulation division. The Tribunal also criticised the annual statements for failing to cross reference detailed information about the offset to the account balance information. Accordingly, the Tribunal found the trustee's disclosure inadequate.
So as to correct the unreasonableness or unfairness of the trustee's decision, the Tribunal ordered the trustee to compensate the member. The Tribunal required the trustee to address this by first calculating what the member's account balance would have been if he transferred his remaining DB to the accumulation division's balanced option one month after the May 2012 letter. The trustee was then ordered to add to this notional account balance any contributions the member actually made up to February 2015 (the date he did transfer to the accumulation division), plus employer contributions during this period at the rate of 10 per cent of salary (paid on the last day of each relevant quarter), together with earnings at the balanced option's applicable rate. If this amount was greater than the amount transferred in February 2015, the difference between the two amounts was to be paid into the members accumulation account, with interest on that amount to the date of actual payment.
This is another case where the complainant was asking for compensation from the trustee and the trustee's refusal to pay was the decision being reviewed by the Tribunal.
The complainant was the wife of the deceased member. She had previously made a complaint to the Tribunal concerning non-payment of a death benefit. This complaint resulted in the trustee being ordered by the Tribunal to pay her $200,000 to address the unreasonableness or unfairness of its previous decision. The trustee had complied with that determination.
The wife was now making a second complaint to the Tribunal. She wished to be compensated for her loss of interest on the $200,000, plus legal and accounting fees she incurred in running the first Tribunal proceedings together with damages for the distress caused to her by the initial non-payment of the death benefit.
The Tribunal pointed out that it is not a court and it derives its powers from the Superannuation (Resolution of Complaints) Act 1993 (Cth). That Act neither empowers the Tribunal to award compensation for distress or personal damages, nor to direct a third party (a trustee or an insurer) to so pay. The Tribunal also pointed out that if the complainant was unhappy about the result of the Tribunal's earlier decision, she had the right to appeal to the Federal Court within 28 days of that decision. Having not done so, she had lost any right to further compensation.
The Tribunal affirmed the trustee's decision to not pay any additional moneys.
Should a trustee be able to seek repayment of an overpayment made to a member when she withdrew her entire retirement savings in July 2008 and the trustee did not advise her of the overpayment until June 2014? Was this just too much time delay?
The member had a DB interest. The administrator had made an error that caused her to be overpaid $7,517.98. The member was concerned that she had no way of checking the veracity of the trustee's calculations but notwithstanding this, she had offered to settle the claim tor $3,000. This settlement offer was rejected by the trustee.
As the member was concerned about the trustee's calculations, the Tribunal had to carefully examine the figures presented to it so as to satisfy itself as to the correctness of the overpayment. The Tribunal also noted the trustee had agreed that the sole cause of the overpayment was the administrator's new computer platform. It also agreed with the trustee that where an overpayment has been mistakenly made, the law gives it a right to recover. For the trustee to not have such a right, the member had to demonstrate either a change of position as a result of the overpayment or that repayment would cause financial hardship.
The Tribunal held there was no evidence justifying the member not repaying the overpayment. Further, it accepted that 2012 was the relevant date when the trustee first discovered the error. The time limitation therefore commenced in 2012 which clearly gave the trustee the right to seek recovery up until 2018. Seeking recovery in 2014 was well within the six year time limitation.
The Tribunal affirmed the decision of the trustee to seek recovery, effectively permitting the trustee to take steps to enforce the repayment of the overpaid amount.
This article was first published in Super Funds, 1 August 2017.