Trustees should stick to the basics

Half-yearly benefit statements are on the way, and members will need some good information from you about your super fund’s performance in the context of world events.

Member enquiries and other member communication

There is much advertising and public information about super as a long-term investment, however, specific information about your fund’s own position will be more relevant to your members, and may help them feel more in control.

There is also of course a legal responsibility to communicate material changes or significant events, but this doesn’t mean you must communicate on matters that are generally known in the marketplace.

Think about questions like:

• What is happening with the fund’s own investments, and are there any freezes or closures that should be communicated to members?
• How are world changes being reflected in the fund’s own investment strategy?
• Are there any downstream investment reporting issues that may impact on what you say to your members?
• Is a supplementary product disclosure statement (PDS) required?
• Is the fund’s disclosure in relation to risk profiles of investment options still adequate or do you need to revisit these?
• Are there some matters that your membership may need more information about? For example, if a higher proportion of members are switching from one investment option to another, should you restate any terms and conditions relevant to switching, such as relevant details from your unit pricing policies?

You have probably already experienced a significant increase in requests for information in relation to specific investment options (like cash) or in relation to the best way to handle redundancy payments. Are your staff members able to handle the new questions they may be receiving? They may need new scripts or additional training.

In particular, trustees should think about whether funds will receive questions they are not authorised to answer. Are your people aware of the limits on the advice they can give? It might be necessary to run a refresher ‘no advice’ training session.

Don’t forget that ASIC (Australian Securities and Investments Commission) has announced it will allow super funds to apply for temporary relief, to enable them to provide limited advice to members. Do you need to apply for this relief and, if so, how will you implement the provision of limited advice?

Income streams

A recent change triggering a potential significant event disclosure obligation is the change proposed to minimum amounts for pension drawdowns. If you have pensioners it will be important to advise them quickly about proposed changes to regulations that will reduce the minimum amount required to be taken as a pension.

Although at the time of writing the new rules are not yet in place, waiting for the new rules would be likely to disadvantage some members, such as those who have already drawn down the reduced minimum amount, and who can afford to discontinue pension payments for the remainder of the year. Excess amounts drawn down cannot be recontributed, so getting the message to affected pensioners is important.

Complaints

Tough times will no doubt give rise to a greater level of member dissatisfaction. It is appropriate to review your complaints process to ensure your written procedures are up to date, and that you have enough trained people to deal with enquiries and complaints in the timeframes required.

There are also legislative changes that will add to the load of your staff handling death benefit and family law claims.

The changes allow same-sex couples to receive equal treatment with respect to superannuation entitlements, and enable superannuation splitting for family law purposes for de facto couples, including same-sex couples.

Funds will need to revise their communication material and procedures for these changes, including their PDSs and forms. They may also need to amend their trust deed, call centre scripts and other staff training material. Think too about your delegations and reports to the board. Will the legislative changes be picked up or do you need revisions here as well?

Hardship cases

Trustees should think about their procedures for dealing with hardship cases to ensure the fund’s process is streamlined and transparent.

Don’t forget that Austrac has also provided some concessions in the identification procedures for payment of superannuation fund moneys to the victims of the Victorian fires and Queensland floods.

Investment strategy

How are those asset allocations looking? The significant drop in asset values and the flight to cash, may mean that your fund’s published investment strategies, and even some mandates may need amendment.

What and when you invest is a different challenge and beyond the scope of this article. I am simply recommending that your disclosure documents and your contracts reflect your intended strategy at this time.

Unit pricing

Extreme market volatility will highlight any weakness in unit pricing procedures.

Trustees should think about any new or heightened operational risks to members or to the fund. Even if these operational matters are outsourced, it is incumbent on the trustee to monitor unit pricing performance against agreed or expected service standards.

Funds should have specified procedures that should be working effectively now. Pay careful attention to any glitches because unit pricing errors in this economic climate could be very costly.

Governance

Trustee boards must ensure that their governance arrangements will ensure timely decision making based on good information.

The financial crisis is presenting unprecedented challenges and is likely to present keen opportunities. Effective boards will be able to respond appropriately. Consider the scope of delegations, the content of regular board reports, the frequency of board meetings and the external expertise you seek. Are changes needed?

Outsourcing contracts

Keep talking to your service providers. Many of the matters discussed here require additional work, which in the current climate trustees may be unwilling to undertake. Trustees will no doubt be trying to keep outsourcing and other costs to a minimum, but your existing commercial arrangements and your relationships with your service providers may give you options other than insourcing or doing nothing.

For example, it may be possible to renegotiate fee arrangements, second staff, or make other arrangements that are cost effective for you and the fund, while still ensuring an appropriate level of service to members and an attentive approach to governance and fund operations. After all, we are in this together.

Anne MacNamara is a superannuation partner at law firm Henry Davis York (HDY).

HDY is an Australian law firm recognised for its leading financial services practice. This includes an internationally recognised insolvency and restructuring team as well as leaders in banking litigation, funds management and superannuation, and corporate insurance advisory.