Case 1

The member was aged 65 when she retired from full-time teaching. In discussing options with the fund she indicated that she may occasionally work some casual teaching hours. On the suggestion of the fund’s representative, she decided to leave $5000 in the fund (rolling over $504,959.97 to another fund). She understood that the remaining account balance would be sufficient to maintain her life cover and pay fees. Within a few months – the account balance was ‘zero’ and life cover cancelled.

The member complained to the trustee asking for reimbursement of her account balance of $5,000, the contributions made to the fund due to some casual teaching and the fees which had been deducted before the account balance was set at ‘zero’. The trustee refused and it was this decision that was being reviewed by the Tribunal.

So how and why did this happen?

When the member decided to roll out her super monies in October 2015, the trustee estimated her account balance using the latest available investment returns which were positive at that time. Based on this calculation, the bulk of her retirement savings were rolled over and $5000 left in the fund. In November and December 2015, the member was employed casually and superannuation contributions of $1,282.05 were credited to her account.

The trustee recalculated the actual investment returns at the end of the year for the previous six months. The result of this calculation was a negative investment return. Given the member had over $500,000 in October 2015 when the negative rate was applied to her current account balance (just over $6000), it actually went into the negative and was then reset at ‘zero’. This resulted in the cancellation of her life cover.

The member was advised of her ‘zero’ account balance in February 2016 and in March and April 2016 some small contributions were received into the fund due to further casual teaching roles. With the account going into the positive again, the insurance was reinstated but that soon lapsed due to the account having insufficient funds to cover premiums.

The member argued that she was not informed that her account would be reassessed as at 31 December 2015 and an adjustment made. At the time, the markets were volatile and had she known of the recalculation she would have rolled out her entire funds and closed her account. She also pointed out that the situation had arisen as a consequence of the advice she had received from the fund over a number of phone calls.

Conversely, the trustee submitted to the Tribunal that while the fund representative had not specifically discussed the final earning rate being determined after her partial withdrawal had occurred, the process was accurately described in the PDS and on the fund’s website. The trustee was also able to prove that all its calculations were in accordance with the trust deed and its established process. None of this was disputed by the Tribunal.

The Tribunal also agreed with the member that a number of phone calls had been made to the fund. This was evident from a recording on one of those conversations referring to previous calls. The Tribunal held it had no reason to doubt the member that the decision to leave some money in the fund resulted from the suggestion made by the fund’s representative.

Given this factual matrix the Tribunal concluded that the trustee should have provided the member with information about the end of year recalculation so as to ensure the member could make an informed decision on whether she wished to adopt the fund’s suggestion—to stay a member with a small balance—and whether the amount of $5000 was sufficient to cover her requirements. In coming to this conclusion, the Tribunal noted there was no information on the benefit application form that would have alerted the member to the fact of the recalculation at year end.

The Tribunal held the trustee’s decision to not compromise the member’s claim was unfair and unreasonable. It determined the member should be repaid the $5000 originally left in her account, together with all the contributions made due to her casual teaching post retirement, plus interest on these amounts at the fund’s cash rate. The member was not entitled to reimbursement of any of the fees or premiums. This was because if she had gone through with her original plan to close her account the insurance cover would have ceased at that time.


Case 2

This case raises the issue of whether the trustee should pay the member for the loss he incurred when not transferring his account balance to another fund for some six months while he waited for the trustee to compensate him for an error he actually identified in the first place.

In July 2015, the member noticed that his super account had incurred a loss of $17,297.71 which he identified as an error. He started discussing this with the fund and soon the trustee agreed it was an error in the fund’s unit pricing calculations. The trustee indicated the error would be fixed in approximately two weeks but it actually took the trustee six months to rectify the problem.

In December 2015, the member’s account balance was corrected by crediting to it an amount of $73,042.12.

After the error had been fixed, the member advised the trustee that he had intended to roll out his balance to another fund’s pension product back in July, but had not done so, as he was waiting for rectification of his account balance. The member argued that had he effected the roll over when he intended his total superannuation savings would have increased by $17,763.69 in his new fund.

The trustee refused to pay him compensation and it was this decision that was being reviewed by the Tribunal.

The trustee responded to the member by saying that had it known he wished to transfer his account balance to another fund, it would have actioned the request and this would have had no impact on the trustee’s loss of earnings analysis and the eventual compensation amount allocated to him.

In a written submission to the Tribunal the member wrote:

“If they could not rectify the error causing the problem and provide me with an accurate Statement [sic], I thought that if I rolled over the funds from [the Fund] then would I have any rights to push for what was owing to me, as my account would reflect zero funds. As also previously stated, I was becoming more and more dissatisfied with [the Fund] and was very keen to remove myself – and very concerned that I might never see the issue rectified. …Following an extremely large loss of super funds [the Fund] following the GFC and both my wife and myself past the 65 year age bracket, surely you could understand that losing a further upwards of $70K, was a harrowing experience, which grew progressively every time they advised that it would be rectified and was not.”

While the Tribunal carefully considered the emotional toll remediating the error had caused the member and the six month delay looked unacceptable, when it fully explored the facts it acknowledged that the trustee had to ensure it fully rectified the problem across all members affected and that took time. The Tribunal also commented that the member’s silence on wanting to roll over his funds meant that the trustee was denied any opportunity to proactively deal with the issue. Put simply, the member did not appreciate the fiduciary duty the trustee owed him. Accordingly, the Tribunal agreed that the Trustee could not be accountable for the member’s loss in these circumstances.