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Trustees warned on tardiness
There has been an upswing in complaints to the Superannuation Complaints Tribunal (SCT) as a result of the declining investment returns being generated by superannuation funds and the tardiness of funds in meeting member requests to switch investment options.
The SCT has revealed the upturn in complaints and suggested that many might not have occurred during a period of positive investment markets.
It cited a typical example of a complaint being about a delay in making an investment switch or transferring a benefit to another fund.
And while the tribunal's acting chairperson, Jocelyn Furlan, has made clear that the body does not have the jurisdictional reach to deal with complaints that relate to investment losses, it could be compelled to become involved if the losses are deemed to be related to non-disclosure or misrepresentation.
Furlan referred to the example of a member who applied to transfer to another fund or cash their benefit out and warned that if the transaction took longer than the member expected, a complaint was possible to the trustee and then tribunal on the basis of compensation for the investment decline incurred during the period of delay.
"The decision of the trustee that is the subject of inquiry by the tribunal in these cases is the refusal of the trustee to compensate the complainant for the amount of loss claimed," she said.
Furlan said in such circumstances the SCT would ask the complainant to quantify his or her believed loss and then require that the trustee provide "hypothetical" calculations of what the complainant's account balance would have been had the transaction taken place in a timely manner.
She said the tribunal would ask the complainant for information about why he or she formed an expectation in relation to the transaction and why there was a mismatch between their expectations and the outcome that eventuated.
"The complainant may point to a misrepresentation or non-disclosure that he or she relied on in deciding to transfer to another fund or cash out his or her benefit," Furlan said.
She said the complainant would then be asked what he or she might have done differently had they known the true situation, such as the transaction taking two weeks rather than two days.
"The purpose of this enquiry is to establish whether the actions taken by the complainant [relied on] incorrect or misleading information or whether the complainant would have undertaken the transaction anyway and is disappointed by the decline in his or her account value," Furlan said.
She said in rare cases a trustee might argue that it had no power to resolve the complaint because it had no compromise power or because the fund did not have reserves from which to pay the settlement amount.
"In relation to the first argument, most trust deeds give rise to trustee power to compromise a claim and relevant state and territory legislation confers that power on trustees," Furlan said.
"In relation to the second argument, the tribunal's current view is that the absence of reserves does not prevent the trustee from making a commercial decision in the circumstances, like any other commercial decision in the course of running a superannuation fund."
AUTHOR
Mike Taylor
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