The Superannuation Complaints Tribunal of Australia handed down a decision on 2 February 2014 (Determination Number D13-14\109  SCTA 6) which reinforces the rights of trustees to change the terms of a superannuation fund to the detriment of some of its members, and the ability to remove a minimum return rate offered by a fund at the request of an employer contributing to the same fund.
In this case the superannuation fund had been set up by an employer which guaranteed former employees who remained as members of the fund a minimum of 4% return on their superannuation investment. This minimum return was only applicable to a small percentage of members of the fund. The employer funded the shortfalls arising from the performance of the fund in order to meet the minimum return rate.
The trustee removed this minimum return provision in compliance with the requirements under the trustee deed (including a six month notice period) at the request of the employer. The employer had indicated that due to changes in superannuation legislation, the minimum return was being applied to larger benefit amounts for a larger period of time, which was not envisaged at the time the term was included in 1997.
The member of the superannuation fund argued that removing the 4% minimum return rate was unfair or unreasonable. In particular, the member argued that the removal of this provision:
- now exposed his fund to the volatility of the market;
- passed the benefits to only a small percentage of members, and so it would be unfair for the fund to argue that the minimum return provision adversely affected the majority of the members of the superannuation fund; and
- was in the interests of the employer rather than the members of the fund.
The Tribunal, in accordance with powers under the Superannuation (Resolution of Complaints) Act 1993, ruled that it was not unfair or unreasonable for the trustee to remove the 4% minimum return, on the basis that the trust deed granted this power to the trustee.
Furthermore, the Tribunal considered the original purpose of the provision and ruled that, due to changes in the law and the current use of the minimum 4% return rate, its removal was not unfair or unreasonable. The Tribunal also accepted that the Superannuation Industry (Supervision) Act 1993 (Cth) permitted trustees of superannuation funds to adapt to legislative changes and employer requests for change as long as it is permitted under the fund’s trust deed.
What this means for you
This case highlights the following.
- Trustees can consider employer requests to change terms in a fund that may be to the detriment of its members.
- Depending on the terms of the superannuation fund, a fund may be providing a benefit to an exclusive portion of its members at the expense to others.
- The terms of a superannuation fund can be fluid; receiving significant benefits in one year does not guarantee the same in the future, as those terms can usually be changed.