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Trustee’s super decision for super insurance?

Additional insurance for superannuation scheme members

David was an employee of the New Zealand Agriculture Network (“the employer”) and a member of the New Zealand Agriculture Network Superannuation Scheme (“Super Scheme”). Universal Trust Limited acted as the trustee (“the trustee”) for the Super Scheme.

All Super Scheme members had life and total disability insurance cover. The premiums for this insurance was paid from the members’ fund balances. This meant that Super Scheme members each paid for their own insurance.

From 1 October 2014, Super Scheme members were to receive additional insurance through the Member Insurance Benefits Programme (“Insurance Benefit”). The Insurance Benefit provided Super Scheme members with income protection insurance and increased their life and physical loss insurance cover.

The employer produced a FAQ document to inform Super Scheme members that the trustee had made an amendment to the Super Scheme Trust Deed (“Trust Deed”). The amendment allowed the Insurance Benefit premiums to be paid from the Super Scheme Reserve Account Fund (“Reserve Funds”).


David’s view

David believed that the trustee had not acted in accordance with the Trust Deed and had breached its trustee’s duties.

David argued that the trustee breached its trustee’s duties by not providing Super Scheme members with the opportunity to voice their concerns before amending the Trust Deed. Under the Trust Deed amendments, which resulted in any detriment or loss to Super Scheme members, could not be made unless every member’s written consent had been obtained. David said the use of the Reserve Funds to pay the Insurance Benefit premiums was a “loss” because the Reserve Funds were finite. He believed that the use of these finite funds to pay for the Insurance Benefit premiums was detrimental to the existing benefits available to Super Scheme members.

Further, David argued that his Insurance Benefit premiums should be paid by the employer directly. Employees of the New Zealand Agriculture Network who were not members of Super Scheme also received the Insurance Benefit, except that their premiums were paid by the employer. David considered that the Reserve Funds were being used to pay for something the employer should be paying.


The trustee’s view

The trustee considered that the amendment to allow Reserve Funds to pay for Insurance Benefit premiums was a benefit, not a loss, to Super Scheme members.

The trustee acknowledged that the Reserve Funds could be used to make direct payments into members’ accumulations. However, this was one of many options available to the trustee and there was no guarantee that this would happen. The trustee said that the Reserve Funds could be used for numerous purposes which included payment of insurance premiums and that Super Scheme members had no direct claim to the Reserve Funds.

The trustee said it was responsible for the compliance of the Super Scheme and was required to ensure that Super Scheme members were treated fairly. However, the trustee said it was not responsible for the overall employment programme run by the employer.


FSCL’s view

In our view, the trustee was entitled and appropriately exercised its discretion to amend the Trust Deed.

The Trust Deed’s main purpose was to provide benefits to members of the Super Scheme. We found that the additional insurance made available to Super Scheme members as a result of the introduction of the Insurance Benefit was not a loss. We accepted the trustee’s argument that Super Scheme members had no direct claim on the Reserve Funds and therefore could not argue that, by using the funds to pay Insurance Benefit premiums, the trustee was reducing member benefits.


Because we found that the amendment to the Trust Deed was not to David’s or other Super Scheme member’s detriment, we agreed that the trustee did not need to obtain the consent of Super Scheme members before making the amendment.  

FSCL could not investigate David’s complaint about the employer paying for non- Super Scheme member’s premiums. This aspect of David’s complaint was an employment issue between David and the employer (rather than between David and the trustee).

We concluded that the trustee had complied with the Trust Deed provisions and had not breached its trustee’s duties.