SCT Quarterly - Q2 2018

Chairperson's welcome

Welcome to SCT Quarterly.

This quarter, we will provide updates on the changes taking place at the Superannuation Complaints Tribunal (SCT) as we prepare for the introduction of the Australian Financial Complaints Authority (AFCA) and the eventual closure of SCT.

The second quarter of 2018 was a great one for SCT. We resolved 551 complaints, an increase of 13.3% on Q1. This would be an impressive result in any circumstance, and I'd like to thank the staff of SCT for continuing to focus on the resolution of complaints during this time of change.

In Q2 2018, we ramped up our recruitment activities as we prepared for the commencement of AFCA and the closure of SCT. With the focus of resolving all complaints open at SCT by 2020, we have filled a number of support roles recently. We now turn our attention to the recruitment of complaint analysts.

At 30 June, we had 1,897 open complaints. We will continue to accept complaints until 31 October 2018, when our focus will shift to resolving our existing complaints. We encourage trustees to continue actively working toward resolving complaints that remain open with us, and we continue to engage with AFCA as they prepare to start accepting complaints on 1 November 2018.

We hope you enjoy this edition of SCT Quarterly. If you have any feedback, suggestions or queries, please send them through to us at subscriptions@sct.gov.au.

Helen Davis, Chairperson

 

Q2 2018 focus: preparing for change

The second quarter of 2018 was one of change and development for the Superannuation Complaints Tribunal (SCT). The project that was established in Q1 to manage the impacts of the introduction of a new external dispute resolution scheme continued, with planning, communication and the first stage of recruitment the key priorities.

In Q2, SCT increased the number of complaints resolved by 13.3% compared to Q1. Enquiries and complaints received increased slightly during Q2 (6.8% and 2.5% respectively). With the Royal Commission set to commence its hearings for superannuation next week, we expect those numbers to continue rising.

AFCA and the EDR transition period

The Australian Financial Complaints Authority (AFCA) continues to prepare to start accepting complaints on 1 November. In Q2, David Locke was announced as Chief Ombudsman and Chief Executive Officer of AFCA. This followed board appointments in Q1. You can read more about AFCA and its consultations at the AFCA website, www.afca.org.au.

We are now 92 days out from the date that AFCA will start to accept complaints. This is a potentially confusing time to navigate, particularly for those complainants who approach SCT without having first made a complaint to their fund. Depending on the timing of the complaint they make to the fund, and the fund’s response, the future escalation point may be either SCT or AFCA.

From 1 November 2018, our focus will shift from being the external dispute resolution (EDR) scheme for superannuation complaints to resolving our existing complaints. We will continue resolving those complaints as AFCA starts to accept and resolve new complaints.

We understand that this transition period may seem daunting for trustees. Two years may seem like a long time to have two EDR schemes resolving complaints at the same time, using different legislation, rules and processes.

SCT is currently funded until the end of June 2020 to resolve all open complaints. However, trustees will only have to deal with two schemes for as long as they have a complaint open with SCT. A focus on resolving the complaints that are open at SCT could shorten the transition period experienced by a trustee.

We encourage trustees to continue actively working toward resolving complaints that remain open with us.

 

SCT by the numbers Q2 2018

In Q2 2018, we resolved 551 complaints, an increase of 13.3% on Q1.

Types of complaints resolved Q2 2018 - top ten

Type of complaint

Percentage

Death benefit distribution

26.1

Deduction of insurance premiums

10.3

Fees and charges

5.3

Account balance

4.9

Delay in transfer of benefit

4.7

TPD benefit – declined on medical evidence

4.2

Insurance cover in dispute

3.8

Disclosure of information

3.1

TTD benefit – amount in dispute

3.1

TPD benefit – delay in making a decision

2.9

Financial hardship

2.9

 

11.3% of the complaints were finalised at review stage (in other words, with a determination by the Tribunal). The remaining 88.7% of the complaints were finalised and/or resolved by our staff at various stages of the complaints process.

33.9% of finalised complaints were found to be out of jurisdiction. 28.3% of finalised complaints were withdrawn by the Tribunal, and 18.0% were resolved after the holding of a conciliation conference.

In Q2 2018, we received 580 complaints.

Types of complaints received Q2 2018 - top ten

Type of complaint

Percentage

Death benefit distribution

22.4

Deduction of insurance premiums

15.5

Fees and charges

6.7

Account balance

4.6

TTD benefit – amount in dispute

4.1

Administration error

3.6

Insurance cover in dispute

3.6

Delay in transfer of benefit

3.4

Disclosure of information

3.4

TPD benefit – declined on medical evidence

3.1

 

In Q2 2018, we received 6,056 enquiries by telephone and email, an increase of 6.8% on Q1.

 

Case study 1: Withdrawal woes

Full determination available here: D17-18\168 [2018] SCTA 70 (27 March 2018)

Background: The member lodged an application to withdraw his superannuation balance from the fund.

The application was received and the member was notified that it would be processed within 20 business days. Two weeks later, the fund requested that a page be resubmitted. They subsequently advised the member that the resubmit was being treated as a new application.

The member expressed concern, and the trustee agreed to both expedite the application and to check back with the member before finalising the application. The trustee finalised the application within the original 20 business day window, however neglected to check back with the member before finalising the application. The final withdrawal amount was less than it had been on the date of application.

Complaint: The member brought a complaint to the Superannuation Complaints Tribunal, seeking the difference between his balance at the original date of application and the balance at withdrawal.

He stated that he effected the withdrawal because he had recognised that there may soon be big market fluctuations. He instructed the trustee not to finalise the withdrawal without checking with him first. ‘I distinctly said that I did not wish to receive any payout in the meantime as the payout had fallen thousands of dollars and the market might recover during the dispute period.’

Further details: The trustee advised that it met the 20 business day timeframe outlined in its service standard. The payment could occur on any day within that timeframe, and the trustee uses the effective unit price on the day the payment is processed.

The trustee also recognised that it was implied by their service staff that the member would receive a telephone call before the payment was processed, and that this did not occur. As the member advised that he would not have approved the withdrawal had he received the telephone call, the trustee offered to restore the member’s account to the position it would have been in had the withdrawal not happened upon return of the funds.

The trustee asserted that this was a reasonable offer, and one it was not required to make. The member had refused the offer, continuing to request the difference between his balance at the original date of application and the balance at withdrawal.

Decision: The Tribunal determined that the trustee complied with its service standard, processing the application within 20 business days of receipt of the original application. The Tribunal also found that the trustee’s offer to reinstate the account met the member’s stated intention to not withdraw the funds and realise a loss. ‘It seems to the Tribunal that the trustee’s reinstatement offer would have achieved precisely the outcome hypothesised by the complainant.’

The Tribunal affirmed the decisions of the trustee.

 

Case study 2: Fiduciary failure

Full determination available here: D17-18\171 [2018] SCTA 72 (27 March 2018)

Background: The deceased member was 21 years old at the time of his death following a car accident. He had never married and was survived by the mother and father.

The deceased member joined the fund through his casual employment with the employer. He was issued with default insurance of five units of death plus total and permanent disablement and five units of income protection cover. This cover ceased after the member stopped working for the employer. The trustee did not record the member’s address and therefore never communicated with the member, failing to confirm membership of the fund, the provision of cover and the eventual cancellation of same.

When the member died, the employer advised the mother and father that the member had a superannuation account with the trustee. The trustee advised that default cover had been issued but subsequently cancelled, and paid the balance of the account to the parents in equal shares as non-financial dependants.

Complaint: The mother and father brought complaints to the Superannuation Complaints Tribunal, seeking the payment of an amount equivalent to the insured death benefit on the basis that the trustee failed to effectively discharge its legal and fiduciary duties. They also sought that this amount be paid on the basis that they were in an interdependency relationship with the deceased member at the date of his death.

The mother and father made a joint submission to the Tribunal, outlining that the trustee had failed to communicate with the member and pointing to determination D16-17\123 as a similar example. The trustee in that case was found to have potentially breached its fiduciary duty by engaging in misleading and deceptive conduct in its failure to communicate the policy’s commencement and cessation. They also advised that: their son’s mental illness was the sole reason he wasn’t living with them at the time of death; they had continued to provide the member with personal support, financial support and domestic care; and they had expected him to return home when he was well enough to do so.

Further details: The insurer advised that the policy commenced upon the opening of the superannuation account, and ceased some months after the member stopped working for the employer when there were insufficient funds in the account. The insurer declined the claim as the deceased member was not covered.

The trustee agreed with the insurer, confirming that the member was not covered at the time of death. The trustee confirmed that it created the member’s account without an address, and that it made no contact with the member while he was a member of the fund, but also stated that the lack of communication about the policy cancellation was a result of the deceased member not having advised the date of termination of employment.

The trustee did not consider that the mother and father were in an interdependency relationship with the member at the date of his death as there was no commitment to a shared life and the relationship was not above a normal parent-child relationship.

Decision: The Tribunal was satisfied that the member was not covered for life insurance at the date of death. However, the Tribunal was not satisfied that the trustee’s decisions to refuse to compromise the claim and to pay the benefit to the mother and father as non-financial dependants were fair and reasonable under the circumstances.

The Tribunal determined that the trustee’s failure to communicate with the member resulted in him not knowing he had insurance, not knowing how to maintain it if he ceased working for the employer, and not knowing that cover had been cancelled. It also determined that the mother and father were in an interdependency relationship with the member at the date of death.

The Tribunal set aside the decisions to refuse to compromise the claim and to pay the death benefit to the mother and father as non-financial dependants, and substituted the decisions that the trustee compromise the claim in the amount that would have been payable had the member still been covered, together with interest on that amount, and that the amount be distributed evenly between the mother and father as dependants by virtue of interdependency.

 

Case study 3: Contribution confusion

Full determination available here: D17-18\167 [2018] SCTA 74 (28 March 2018)

Background: Over a period of more than two years, the employer paid the member's superannuation guarantee contributions to a fund account that was not the member's.

The employer alerted the superannuation fund and asked them to correct the error.

The trustee subsequently credited the member’s account with the amount of the superannuation guarantee contributions. It did not backdate the contributions, nor did it calculate and apply an amount equating to the growth that the contributions would have experienced had they been made when they should have been made. It did not issue the member with amended member statements for the period, and did not re-report the contributions to the Australian Taxation Office (ATO) once the correction was made.

Complaint: The member brought a complaint to the Superannuation Complaints Tribunal, seeking that her account be credited with an amount representing the growth that would have been experienced had the contributions been made to her account at the right time, and seeking that past annual statements be updated and reissued with the contribution amounts.

The member also questioned the value of a settlement offer made by the trustee regarding the poor service provision and the fees and costs arising from the re-reporting of the contributions to the ATO.  

Further details: The trustee advised that the employer was at fault for the contribution error. The trustee had provided the employer with the correct account details, and the employer had made an administrative error when arranging to transfer the superannuation guarantee contributions.

The trustee stated that it could not be held responsible for the error and that it had taken reasonable steps to rectify it. Once it was advised of the error, it transferred the contributions to the member’s account. It could not be expected to backdate the contributions, nor to deposit a sum equal to the growth, when the contributions had not been invested into the markets at the time.

The member pointed out that the contributions had been received by the trustee in a timely manner, but placed in the wrong account. She said that the fund had experienced growth on the contributions and should apply the growth to her account as part of the correction.

Decision: The Tribunal determined that it was unreasonable for the trustee to transfer the amount of the superannuation guarantee contributions to the member’s account without applying the growth that would have eventuated had the contributions been made to the right account. It found that, while the employer was responsible for the error, the trustee’s means of reporting contributed to the error remaining undetected for more than two years. It also determined that the settlement offer was reasonable to compensate the member for the costs of seeking tax advice and the delay in advising the ATO of the contribution correction.

The Tribunal set aside the decisions to not apply growth to the account and not to issue amended annual statements to the member, and substituted the decisions that growth would be applied and that new statements would be generated and issued.

 

Feedback and contact us

We are constantly seeking to improve our services and the information we provide to consumers, trustees and industry, and we need your feedback to do it.

If you have any feedback on this edition of SCT Quarterly, or any queries or suggestions, please email subscriptions@sct.gov.au with 'SCT Quarterly - Q2 2018' in the subject line.

Subscribe here

Superannuation Complaints Tribunal
Level 7, 120 Collins Street
Melbourne VIC 3000

1300 884 114
http://www.sct.gov.au/
info@sct.gov.au

« GO BACK