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SCT establishes precedent on interest penalties
Superannuation Funds which find themselves on the losing end of a Superannuation Complaints Tribunal (SCT) decision will need to calculate the interest payable to affected members at the earnings rate of their fund over the period in question.
That is the effect of a recent decision of the SCT in dealing with a death benefit nomination dispute which saw the issue left unresolved for more than two years.
The superannuation fund at the centre of the dispute, perhaps foreseeing that its decision as to the disposition of the death benefit would be overturned by the Tribunal asked that any interest payable should be determined at the prevailing Reserve Bank of Australia (RBA) cash rate.
However, as noted by the presiding member, Noel Davis, the superannuation fund did not give any reasons for suggesting the RBA cash rate.
In his SCT findings on the issue, Davis said that in the opinion of the Tribunal, "the appropriate rate of interest is the earning rate that the amount of the death benefit has earned in the Fund up to the date on which the benefit is paid".
His determination said this represented the amount of the earnings in the Fund that "the amount of the death benefit has generated in the long period since the death of the Deceased Member".
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I'm pleased to hear that Noel will be happy for funds to apply negative investment returns to "settlements"!!!