Administration affairs

By Matthew Daley, Jane Paskin and Vanessa Pallone

01 Jun 2017

Some recent Superannuation Complaints Tribunal decisions give guidance on account balances and TPD benefits.

This case concerns whether the trustee's decision to not compensate a member was fair and reasonable. The member was complaining about his account balance decreasing contrary to the actual underlining investment return on the fund assets.

As at 31 December 2014, the members half yearly benefit statement recorded an account balance of $171,889.78. On 22 January 2015, the fund received an on line rollover request to transfer the account balance to a complying self-managed superannuation fund. The rollover request was processed on 28 January (one day later than normal due to the public holiday on 26 January) in the amount of $162,527.79, and the member was essentially complaining about the difference between these two amounts.

The trustee calculated the fund's investment earnings on a weekly basis in arrears and until these rates were released the previous rates were used in any rollover calculations. In the three weeks relevant to the member s complaint, the fund had returned -2.88 per cent (12 January to 18 January), +3.34 per cent (19 January to 25 January) and +1.65 per cent (26 January to 1 February). This meant that when the rollover request was calculated on 28 January, the last calculated return was the negative return of 2.88 per cent and this was applied for a 17-day period. If the rollover had been processed on 29 January, the relevant rate would have been a positive return of 3.34 per cent for the period 19 January to 29 January.

The trustee calculated that the difference in one day was $15,907.74. However, the trustee had applied its own process correctly.

The PDS for the fund stated: "If you exit the Fund, the latest available net investment returns are used to determine your account balance."

More detailed information was contained on the fund's website, including that returns could be negative and positive and that the net weekly rates were generally published on the third day of each week. The member argued that if he had known the actual process used he would have checked the website and only made his rollover application when there was a positive return. He indicated to the Tribunal that, hypothetically speaking, the trustee should have informed him along the lines: "If you rollover to another superannuation fund, the latest published net investment returns are used to determine your account balance. Weekly investment earnings are published on the website on a Wednesday, and backdated to Sunday. Your rollover is processed within three business days, the day [Fund] receives your rollover request is day one.

The latest published net weekly return will be applied to your account for a minimum of10 days and up to 17 days.

This is important: if the latest published return is negative, your account balance will fall, and if the latest published return is positive, your account balance will increase. Exiting the fund, or rolling over your account to another superannuation fund, can have a significant impact, negative or positive, on your account balance. Members are reminded that the return applied to their account for 3-10 additional days is the latest published net investment return, and is unrelated to actual returns."

The Tribunal held that the trustee's decision to rollover the lower amount than that which had been advised to the member in his December statement was fair and reasonable in the circumstances because it had applied its own methodology correctly.

In coming to this conclusion, the Tribunal noted the members arguments about the innate unfairness of the trustees methodology but went on to note that the "core issue still comes down to timing; namely the timing of a rollover request and the date of processing, inevitably produces winners and losers when dealing with equity markets" It is worth noting the Tribunal made no comment on whether the actual methodology was appropriate or could have been improved to avoid members (in the know) timing their rollover requests.

- D16-17M37


This case concerns whether there was an inappropriate delay in paying out a total and permanent disablement (TPD) benefit justifying compensation.

The TPD benefit took 22 months to be paid and the member was clearly disappointed by his fund experience. He wrote: "I and my lawyer [sic] faced a wall of silence, repeated false assertions, misinformation, distortion of the facts and then denial of clear cut evidence until my lawyer was forced to take out a supreme court writ. Only then did they start to talk. I have detailed 7 examples of total lack of assistance by the [claims assistance officer] and 36 examples of Deception, Falsification & Evasion."

The first period of delay was caused by the insurer providing the incorrect claim form which lead to confusion as to what TPD definition applied and caused two treating doctors to write reports based on the wrong definition.

The member had already attained age 65 when he became disabled which resulted in the 'loss of independent living' definition applying instead of the 'own occupation' definition.

The insurer argued that while the mistaken claim forms required it to seek further medical evidence, it did not result in a delay in the assessment. On this point the Tribunal disagreed. The Tribunal calculated a 105 day delay period and it held that the insurer should pay the trustee interest for this period at the rate set by the regulations under the Insurance Contracts Act 1984, compounded annually. The trustee was then directed to pay this amount on receipt to the member together with interest at the fund's cash rate for any period that the amount remained in the fund prior to actual payment to the member.

The second alleged period of delay concerned a disagreement between the member and the insurer as to whether there was medical evidence of disablement before a certain date. After a careful analysis of the medical evidence, the Tribunal held it was satisfied there was no unreasonable delay by the insurer in accepting the claim.

The third period of delay concerned the amount of time it took the trustee to process and pay the benefit after receipt of the insurance proceeds. Here the member argued the delay was "due to irrelevant queries being made, including whether ... [he] was a sole trader, whether his wife had only one Christian name and various other details."

With respect to this third period of alleged delay, the Tribunal noted that there were a number of items that impacted on the payment, including "significant correspondence and discussion after the claim was accepted by the Trustee between Trustee service consultants and the [members] solicitor regarding reimbursement of premiums paid subsequent to the date of injury and interest payable on those premiums".

Here the Tribunal found that the third period of delay was both multi-factorial and unfortunate. A word of advice to trustees was given in the statement that "it would have been preferable for arrangements to be made for payment of the TPD benefit as soon as possible and any further additions to the benefit, such as the repayment of premiums, to be made separately" Notwithstanding the Tribunal's words of advice, it noted that the actual TPD amount received the funds cash rate throughout the delay period. Here the Tribunal commented that it was common practice for superannuation funds to pay interest on insurance proceeds to the date of payment at the fund's cash rate so as to minimise the risk of negative returns. While it took six months to actually pay the benefit, the Tribunal affirmed the trustee's decision to not pay further compensation. The cash rate was therefore sufficient in the circumstances.

Notwithstanding the lack of minutes, the Tribunal went on to find that the trustee was obliged to create a reserve and it accepted that the method adopted by the trustee, having regard to the demographics of the membership and the size of their accounts, was fair and reasonable in the circumstances.

The trustee's decision was therefore affirmed.

- D16-17U35 SF


This article was first published in Super Funds, 1 June 2017.

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