Super verdict: Benefits, bungles and rebuttals

This case concerns the trustee's decision to pay the entire benefit arising on the death of the deceased member to the wife as a financial dependent instead of the deceased member's son.

At the date of his death, the deceased member was married to and living with the wife and was survived by two adult sons from a previous marriage. One of the sons made a complaint that the decision of the trustee to pay the entire benefit arising on the death of the deceased member to the wife was not fair and reasonable, and that the death benefit should be paid to him and his brother.

The son submitted that the deceased member remarried in the last few years and it "was not fair" that the death benefit be paid to the wife. The wife submitted that the deceased member "was the main bread winner" and that she was financially dependent on the deceased member. The trustee submitted that there were three persons who met the definition of "dependent" under the trust deed, namely the wife, the son and the other son of the deceased member but that only the wife was "financially dependent" on and in an interdependent relationship with the deceased member.

The Tribunal noted that the issue is whether the trustee's decision was "fair and reasonable". In reaching its determination, the Tribunal considered all material provided by the parties, the provisions of the trust deed and the relevant law, together with the identity of the beneficiaries, the wishes of the deceased member, the financial circumstances and needs of the potential beneficiaries and the nature of the relationship between the beneficiaries.

In making its determination, the Tribunal noted that the purpose of superannuation is to provide income in retirement to a member and his or her dependents. In the event of a death before retirement, the Tribunal's approach is to consider what might have occurred had the member not died, and whether there is anyone who had an expectation of ongoing financial support or a right to look to the deceased member for ongoing financial support.

The Tribunal found that: it was satisfied that the wife and two sons all qualified as "dependents" under the trust deed; the deceased member did not leave a will, a preferred nomination of beneficiary or a binding death nomination and as such, the deceased member's wishes were not known; whilst the son outlined that he was in difficult financial circumstances, he did not provide any supporting evidence to demonstrate that he was financially dependent on the deceased member at the date of the deceased members death; and the deceased member was the primary breadwinner of his marital relationship, the wife was financially dependent on the deceased member at the date of the death and had an expectation of continuing regular support from the deceased member, had he not died.

On the basis that the trust deed provided the trustee with absolute discretion as to the distribution of the death benefit between any dependents, the Tribunal decided it was fair and reasonable that the death benefit be paid entirely to the wife as she was the only dependent who was financially dependent on the deceased member on the date of this death.

D15–16M16

This case concerns a member's complaint about the trustee's decision to seek recovery of an overpayment from the member.

The critical point being discussed in this case was what constituted the "usual occupation" of the member.

On 28 June 2011, the member received a statement of financial advice in preparation for retirement on 1 August 2011 from a financial adviser. Around a week after the member retired, the trustee transferred $95,000 from the members superannuation account to the member s nominated account as per the statement of financial advice.

In October 2013, the trustee discovered that negative investment returns of $40,217.18 for the period of 1 July 2011 to 8 August 2011 had not been applied to the superannuation account (overpayment). The overpayment was an error on the trustee's part. The trustee wrote to the member in late October 2013, detailing amongst other things, the trustee's proposal to recover the overpayment from the member's pension account.

The amount sought by the trustee was initially $40,217.58, but the trustee later reduced this amount to $29,432.18.

The member submitted that: the trustee had the greatest potential and opportunity to discover the error in question much earlier than was actually the case; the member had no way of independently establishing that the error might be occurring; had there not be an error, he would not have placed his children in private schools for the length of time that he did; and the member incurred $109,136 worth of expenses (including child care, continuing his children's private school education and an overseas holiday) in reliance of being approximately $40,000 better off.

The trustee contended that: it had the legal right and obligation to recover the overpayment; and the assertion by the member that he incurred $109,136 worth of expenses in reliance of being approximately $40,000 better off, cannot reasonably be maintained.

In determining whether the trustee's decision to seek recovery of the overpayment from the member's pension account was fair and reasonable, the Tribunal took into account all material provided by the parties, the provisions of the trust deed and the relevant law. The Tribunal, amongst other things, concluded that had the member been made aware of the error in August 2011, the member would have ensured his children completed their primary schooling at a state school.

The Tribunal was not satisfied that the trustee's decision was fair and reasonable. As such, the Tribunal determined to set aside the trustee's decision and substituted its own decision that the trustee cease its action to recover the outstanding amount from the member.

D15–16M15

This case concerns the trustee's refusal in releasing the complainant's preserved superannuation benefit early on the grounds of severe financial hardship.

The complainant made an application for early release of $10,000 of his superannuation benefit on the grounds of severe financial hardship. The trustee rejected the complainant's application on the basis that it was not satisfied that the complainant was in severe financial hardship at the time the application was made.

The complainant submitted that over a period of five years from 2011 to 2014, he had accessed superannuation on the basis of "severe financial hardship" to supplement his income so as to meet his expenses and that his financial position in 2015 was now worse. The complainant also submitted that: "Once a year I access my super (as is my right to do so) and use the monies to meet miscellaneous expenses over the coming months".

The trustee submitted that: the complainant was a preserved member of the fund and had not taken any contributions from the fund; while the complainant provided evidence of a loan, the loan transaction history showed he was able to make the fortnightly payments required and the balance owing was not overdue; while the complainant provided a copy of an overdue gas bill, there was insufficient evidence to support the complainant's claim that he was unable to pay his debt, at least by instalments, given that nearly a third of his income was spent on discretionary purchases including alcohol and entertainment; and it could not comment on release of benefits outside the fund and that all Australian superannuation schemes are bound by the legislation which specify circumstances for early access to benefits. It also advised the complainant that superannuation has been established as an investment for the complainants retirement.

The Tribunal noted that the relevant legislation requires that the trustee be satisfied that the complainant is unable to meet reasonable and immediate family living expenses, in order for the trustee to be permitted to make a hardship payment. The legislation, therefore, does not permit payments to supplement income because such payments do not fall within the category of immediate family living expenses.

As such, the Tribunal affirmed the decision of the trustee on the basis that the Tribunal was satisfied that the complainant did not provide the trustee with all the information the trustee needed to make a financial hardship payment for immediate family living expenses of $10,000.

D15–16U26SF

This article was first published in Superfunds, 1 September 2016