Members don’t understand super – what can we do?

Given the Australian Financial Complaints Authority (AFCA) has taken over from the Superannuation Complaints Tribunal for new complaints, we thought it timely to review some of its decisions. Of course, AFCA has commenced its role amidst the extensive media coverage of the Hayne Royal Commission and that has, of course, resulted in heightened awareness of members’ superannuation experiences.

The following case reviews don’t reveal interesting points of law, but they do indicate our superannuation industry must try harder to engage with members in a meaningful way. Put simply, members don’t understand their superannuation, and this leads to complaints.

Maybe we need to start an industry conversation about the language we use in our communications with members. Let’s face it – the word “preserved” is much more likely to be associated with food preparation than not being able to get access to your own savings. The word “premium” is probably much more likely to be associated with the concept of “going up a notch” to a “better class of product” than the “cost of insurance”, and the word “cover” is more likely to be associated with the two words “cover up”, a negative connotation.

Case 1

This is a complaint from a fund member about the trustee opening a super account for him without his consent. The member wants a refund of all the money in his fund account and the trustee has refused to do so.

The trustee received superannuation guarantee (SG) contributions from the member’s employer which were then credited to the fund’s MySuper product. That product had been chosen by the employer as its default superannuation fund for when an employee had not provided a “choice of fund” form. At law, when a trustee receives such a contribution it must open an account in the employee’s name and credit that account with the contributions. Further, the trustee must, under the MySuper rules, provide insurance cover for death and permanent incapacity, unless the member opts out of the cover. The trustee is entitled to deduct from the member’s account administration fees and the insurance premiums referable to the member. Needless to say, the fund’s trust deed reflected these legal obligations of the trustee when receiving SG contributions into the fund’s MySuper product.

The member pointed out he had no idea he was a member until he was made aware of the account by the Australian Taxation Office. This occurred because the employer had advised the trustee of the wrong home address and the fund’s welcome letter and product disclosure statement and, later, an annual statement and a significant event notice, had all been sent to the member’s neighbour. These disclosures were compliant with the law and AFCA held that the trustee had no way of knowing that the address advised by the employer was wrong. It was noted, however, that the member’s incorrect address was recorded in an email from the fund to the member.

The member also advised that the employer had knowledge of his preferred fund and should not have sent the SG contributions to the fund. Again, AFCA points out that the trustee had no way of knowing this and once it received the first SG contribution it had to open the account for the member.

Finally, the trustee was not entitled to refund the SG contributions to the member as they were preserved monies and the member had not provided the trustee with evidence of having satisfied a “condition of release”. It was noted the member could transfer his account balance to another fund, if he so wished. It therefore followed that the trustee’s decision to not refund the contributions was fair and reasonable in its operation.

Case number: 601200 (dated 30/1/2019)

Case 2

In this case the member complained about the trustee’s decision to not refund him the insurance premiums which were charged to his fund account from 14 May 2009 to 6 April 2018.

The member joined an employer sponsored superannuation plan (Plan 1) which was a sub-plan of a larger superannuation fund. As a member, he was provided with death and disablement insurance with the premiums deducted from his account balance. The insurance rates in Plan 1 were “group” rates.

In May 2009, the trustee was advised by the employer that the member had ceased being an employee back in 2007. It then took steps to transfer the member to another sub-plan of the fund that was suitable for non-employer sponsored members (Plan 2). Insurance cover continued in Plan 2, but the premium rates were now calculated on a personal basis and increased significantly.

The member said he was neither advised he would be automatically transferred to Plan 2 on ceasing employment, nor advised of the consequences of the transfer. Fundamentally, the member’s complaint centred around him alleging he was not adequately informed about the increased cost of insurance in Plan 2 which was an increase from $63.68 a month to $119.32 a month. Was this complaint justified?

AFCA concluded the complaint was not justified and the trustee’s decision to not refund the premiums charged was fair and reasonable. AFCA came to this view after carefully analysing the various disclosures given to the member by the trustee and concluding the disclosure contained sufficient information for the member to make an informed decision as to whether he wished to continue insurance cover in Plan 2.

The Employee Information Guide which was sent to the member when he first joined Plan 1, and the Plan 1 Annual Report for the year ending 30 June 2006, both advised that if a member ceased employment and their account balance was over $1,500, then membership would be automatically transferred to Plan 2. On page 36 of the later report it was clearly stated:

“Any insurance cover held will continue in [Plan 2] at the applicable personal premium rates for that personal insurance. These may be at significantly higher premium rates (in some cases up to 3 or 4 times more) than those that applied to your cover obtained in [Plan 1].”

Further, when the member was transferred to Plan 2 in 2009, the welcome letter showed the changes in fees and insurance premiums and provided a comparison to what they were in Plan 1. The trustee had also sent annual statements to the address on its records which fully disclosed the costs and no mail had ever been returned to sender.

The member advised he had changed his address in December 2013 and that his wife had phoned the trustee three times in April 2014 to arrange for the records to show the new address. The trustee had no record of these calls having been received and its normal practice would have been to advise the member’s wife that he had to call the trustee himself due to privacy concerns. In this regard, the member’s evidence lacked plausibility. Notwithstanding the change of address issue, the member would have received the Plan 2 welcome letter in 2009 and, overall, the disclosure was adequate.

Case 600807 (25 February 2019)