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SCT Quarterly - Q1 2017

Chairperson's welcome

Welcome to SCT Quarterly.

And for many of you, welcome back to SCT Quarterly. We're excited to reintroduce this important communication piece, and to do so in electronic format.

Each quarter, we will focus on a particular topic. This quarter, we are focusing on our biggest single category of complaints: the distribution of death benefits. You can read more about this in the following section.

Meanwhile, let's reflect on what has been a busy quarter at the Superannuation Complaints Tribunal (SCT).

We got a head start in December 2016, when the Treasurer and the Minister for Revenue and Financial Services announced new appointments and re-appointments to the Tribunal. We are delighted to welcome our new members, while also welcoming back some familiar faces. We held a member conference at the beginning of March, introducing our new members to the role of a Tribunal member and providing an opportunity for them to meet our staff and each other.

At the end of January, we farewelled five of our members. I'd like to thank Colin Cassidy, John Evans, E Anne Shanahan, Litsa Tsitsis and Sue Walpole for their invaluable contributions to the Tribunal, and wish them well in their future endeavours.

Our work this quarter was completed amid ongoing reviews of, and inquiries into, superannuation. The Productivity Commission Inquiry into Superannuation and the Senate Inquiry into the Life Insurance Industry kept us busy, but the Review into Dispute Resolution and Complaints Framework was our biggest focus.

The review panel released an Interim Report in December, recommending that the SCT should transition into an industry ombudsman scheme for superannuation disputes. We provided a response in February, expressing our support for the aims of the review while highlighting the key differences between superannuation and other financial disputes, and the importance of the statutory model in maintaining high levels of consumer protection.

We now await the release of the Final Report. In the meantime, you can read more about the Interim Report and our response in the Latest News section of our website, and you can access the Interim Report and our response from the Treasury website.

I'd like to thank the staff of SCT for remaining focused on the business of resolving complaints as the review takes place. Our statistics in the section below show that even against an uncertain backdrop, we're getting the work done.

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

Helen Davis, Chairperson

 


Q1 2017 focus: death benefits

At the SCT, we categorise our complaints, enabling us to analyse trends. We have 47 active complaint categories, which fall under three broad headings: death complaints; disability complaints; and administration complaints.

Our biggest single complaint category is the distribution of death benefits. 21.5% of complaints received in Q1 2017 fell into this category. By contrast, our next biggest single complaint category was the deduction of insurance premiums at 11.5%.

Innovation at the SCT

Given the large percentage of death benefit distribution complaints we receive, we have focused recent improvement efforts in this area.

At the SCT, we must attempt conciliation before review. We are currently piloting a new process for death benefit complaints where the only issue in dispute is the distribution of that benefit to the identified dependants. In this new process, conciliation is brought forward, allowing the complaint to be resolved or proceed to review earlier.

Early results are encouraging. We're closing the pilot complaints earlier, averaging 141 days from receipt to finalisation of pilot complaints compared to 405 for other death benefit distribution complaints.

 Type of complaint

 Average days from receipt to resolution

 Death benefit complaint – pilot

 141

 All other death benefit distribution

 405

Of the pilot complaints that have been finalised, 45.5% were resolved prior to the conciliation conference, and 54.5% were resolved following conciliation.

However, we've learnt that fewer complaints qualify for the pilot than originally anticipated, with pilot complaints representing just 10.5% of all open death benefit distribution complaints. Often, questions of dependency sit alongside the question of distribution, necessitating a more extensive investigation.

In addition to this pilot, we have started engaging with the trustee earlier in the analysis of death benefit complaints. We now request beneficiary details immediately upon establishing jurisdiction. Trustees then have 28 days (from the date of notification) to provide the relevant information. The sooner it is provided, the sooner we can begin our investigation.

Common areas of complainant confusion

The distribution of a deceased member's superannuation benefit is an emotionally fraught topic to begin with. This can be compounded by a complainant's lack of familiarity with the role of superannuation. For example, it is often not well understood that superannuation does not automatically form part of a deceased member's estate.

If a potential beneficiary doesn't understand the reasons behind the distribution decision, the unresolved complaint often makes its way to the SCT. We see some death benefit complaints withdrawn during the investigation stage when the complainant becomes aware of the factors that led to the original distribution decision.

Clear communication with any potential beneficiaries is vital when notifying them of a distribution decision. Quoting a difficult-to-interpret superannuation law and then listing the decision without further explanation may raise more questions than it answers. Trustees must provide written reasons for their decision in relation to the complaint (section 101(1)(c)(i) of the Superannuation Industry (Supervision) Act 1993).

There is also a high level of legal representation in death benefit complaints, as complainants and joined parties have often engaged legal representatives to deal with the distribution of the estate. The lawyers may be familiar with estate planning and family law definitions, but are not always cognisant of the differences in superannuation law and the importance of the definitions within the trust deed.

To avoid the escalation of the complaint, we recommend trustees do the following:

  • Outline the decision clearly, making reference to the relevant law or section of the trust deed without using that as the entire explanation.
  • Provide any definitions relevant to the decision, and how they apply in this circumstance.
  • If a complaint is made, respond to the details of the complaint (rather than simply restating the decision) and answer any questions that arise. For example, if a potential beneficiary or a legal representative refers to a State law definition of 'spouse' in their complaint, provide the definition referred to in the trust deed or in superannuation law and note the difference.

 


SCT by the numbers Q1 2017

In Q1 2017, the SCT resolved 508 complaints, 25.2% of which related to the distribution of death benefits.

Types of complaints resolved Q1 2017 - top ten

 Type of complaint

 Percentage

 Death benefit distribution

 25.2

 Deduction of insurance premiums

 8.7

 Account balance

 5.1

 Fees and charges

 4.7

 TPD benefit – declined on medical evidence

 4.7

 Delay in transfer of benefit

 4.3

 TPD benefit – delay in making decision

 3.5

 TTD benefit – declined on medical evidence

 3.3

 ROBP – financial hardship claim

 3.1

 TTD benefit – amount in dispute

 3.0

8.1% of the complaints were finalised at review stage (in other words, with a determination by the Tribunal). The remaining 91.9% of the complaints were finalised and/or resolved by our staff at various stages of the process.

17.4% of finalised complaints were withdrawn by the complainant after resolution of their complaint at a conciliation conference. 11.2% were resolved as the conciliation conference was being prepared, and another 11.2% were withdrawn by the SCT after satisfying that the complainant no longer wished to proceed with the complaint.

Interestingly, 37.2% of finalised complaints were found to be out of jurisdiction. The most common reason was that the complaint had not first been made to the trustee – in fact, this accounted for almost 80% (78.4) of out-of-jurisdiction complaints finalised.

We encourage all trustees to clearly communicate their internal dispute resolution processes to members (or, in the case of death benefits, potential beneficiaries) to save them the time and frustration of approaching the SCT first.

In Q1 2017, we received 562 complaints, 21.5% of which related to the distribution of death benefits. We also noticed an increase in the number of complaints relating to the deduction of insurance premiums, at 11.5%.

Types of complaints received Q1 2017 – top ten

 Type of complaint

 Percentage

 Death benefit distribution

 21.5

 Deduction of insurance premiums

 11.5

 Account balance

 6.0

 Delay in transfer of benefit

 4.6

 Fees and charges

 4.0

 Insurance cover in dispute

 4.0

 TPD benefit – declined on medical evidence

 3.9

 TPD benefit – delay in making decision

 3.7

 TTD benefit – amount in dispute

 3.7

 TPD benefit – amount in dispute

 3.2

In 2016, the SCT changed how it categorised incoming calls and emails. We now distinguish enquiries as separate from complaints. We also added email enquiries to our data collection methods, allowing us to more accurately reflect the level of enquiries we receive.

An enquiry is defined as an initial contact with the Tribunal to obtain information about the complaints process or a request for further educational information to clarify complaint matters. An enquiry may or may not lead to the lodgement of a complaint. In Q1 2017, the SCT received 5607 enquiries by telephone and email.

 


Case study 1: When is a spouse a spouse?

(reviewed by the Tribunal, determination D16-17\106 [2016] SCTA 205 (30 December 2016))

Background: The deceased member died in a motorcycle accident. He had not nominated any beneficiaries for his death benefit and he died intestate.

The trustee identified seven potential beneficiaries for the death benefit: the claimed spouse; the deceased member's three children; and the three children of the claimed spouse. The children of the claimed spouse notified the trustee that they did not intend to make a claim for the death benefit. The trustee determined to pay the entire death benefit to the claimed spouse on the basis that she was in a de facto relationship with, and was a financial dependant of, the deceased member.

Complaint: The three children of the deceased member each brought complaints to the SCT, stating that they were each financially dependent on the deceased member and that no spouse-like relationship existed between the deceased member and the claimed spouse. They submitted that the claimed spouse maintained a separate address, and that there was no evidence she had cohabited with the deceased member.

Further details: The claimed spouse advised that she lived with the deceased member and maintained the separate address for use by her daughter, who confirmed that she lived in the home without the claimed spouse. The claimed spouse was severely injured in the same accident that caused the death of the deceased member, and was hospitalised for several months. She advised that much of the evidence of cohabitation was removed from the house by others while she was in hospital, and provided statutory declarations from friends, family, a neighbour, the deceased member's employer and the company that managed the lease for the deceased member's rental property to support the existence of the spouse-like relationship.

Decision: The Tribunal was satisfied that the claimed spouse qualified as a spouse under the trust deed, living together with the deceased member on a bona fide domestic basis in a relationship as a couple at the date of death. The Tribunal determined that there was no evidence that the complainants were relying on the financial support of the deceased member at the time of his death.

The Tribunal affirmed the decision of the trustee.

 


Case study 2: Spouse or caravan cohabitant?

(reviewed by the Tribunal, determination D16-17\097 [2016] SCTA 193 (6 December 2016))

Background: The deceased member died following an illness. In the weeks prior to his death, he granted power of attorney to his sister and eldest daughter. He had not updated his will for more than 15 years, and had not nominated a preferred beneficiary for his benefit.

The trustee identified four potential beneficiaries for the death benefit: the claimed spouse; and the deceased member's three children. The trustee initially determined to pay the death benefit to the claimed spouse. However, after receiving complaints from the three children, the trustee set aside the decision and replaced it with the decision to pay the death benefit in equal parts to the children of the deceased member. This second decision was the decision under review.

Complaint: The claimed spouse brought a complaint to the SCT, stating that she was in a relationship with the deceased member and qualified as his spouse. The pair had lived together in the deceased member's caravan for years, travelling for part of that time. They shared domestic duties and living expenses, and the claimed spouse ceased employment to care for the deceased member when he became ill.

Further details: The children of the deceased member disputed that the claimed spouse qualified as the spouse. They listed the continued separation of financial accounts, the absence of the claimed spouse in the will and the selection of the sister and eldest daughter as the enduring power of attorney as evidence of the casual nature of the relationship.

Decision: The Tribunal was satisfied that the claimed spouse qualified as a spouse under the trust deed, living together with the deceased member on a genuine domestic basis in a relationship as a couple at the date of death. The Tribunal noted that, by their own admission, the deceased member's children were not financially dependent on him.

The Tribunal set aside the decision of the trustee and substituted a decision that the entire death benefit be paid to the complainant as the spouse of the deceased member.

 


Case study 3: Beneficiaries in agreement

(resolved at conciliation, complaint treated as withdrawn by complainant)

Background: The deceased member had made a non-binding nomination of 100% of the benefit to his wife. However, the deceased member's wife died before the benefit was paid.

The trustee identified four potential beneficiaries for the death benefit: the deceased member's four adult children (two sons and two daughters). The trustee determined to pay the death benefit in equal parts to the children of the deceased member.

Complaint: The younger daughter of the deceased member brought a complaint to the SCT, stating that the deceased member had intended for his two daughters to receive an equal share of the benefit. She based this understanding on the wills of both the deceased member and the deceased member's wife.

Further details: The remaining children of the deceased member joined the complaint, and supported the complainant's position. All four potential beneficiaries agreed that the death benefit should be paid in equal parts to the two daughters.

Conciliation outcome: The trustee and the parties signed a settlement agreement and lodged it with the Tribunal. The Tribunal treated the complaint as withdrawn.

 


We're back…

… and we want your feedback!

This is our first SCT Quarterly in two years. The method of communication has changed. The layout has changed. The information has changed.

And it will continue to change. 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 – Q1 2017' in the subject line.

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Superannuation Complaints Tribunal
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Melbourne VIC 3000

1300 884 114
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