MySuper members could see a ‘one-off’ drop in their initial account balance if there are any legally enforceable commissions attached to their account, according to Minter Ellison partner Maged Girgis.
Trustees of funds offering MySuper products will be required to transfer the balance of members in the default option to a MySuper product by 1 July 2017.
However, Girgis pointed out that page 19 of the Regulatory Impact Statement relating to the MySuper Bill states:
“…the trustee may, depending on the circumstances, have a right to retain an amount in the fund by way of an indemnity in respect of potential liability, prior to calculating the balances of transferring members”.
The amount of money deducted from the account would be significant, especially considering trustees will err on the side of caution when provisioning for these liabilities, Girgis said.
“It does raise the question: if a trustee gets it wrong and ‘under provisions’, what happens then? Are they personally liable? Do they recover it from another part of the fund? Will it shift to other members or be socialised across the fund?” Girgis asked.
Minter Ellison partner Richard Batten suggested the one-off drop in the account balance could potentially mean a negative year’s income for members.
The lump-sum hit would only affect retail superannuation fund members, since industry funds do not pay commissions to advisers, Batten added.
