3. Matters Arising
3.1 The Superannuation Schemes Act 1989 emphasises the role and responsibilities of trustees, combining the elements of:
- Trustees' freedom of action
- Trustees to be responsible for their actions
- Transparency of trustees' actions.
Trustees are, of course, required to act in the best interests of the scheme's members and beneficiaries at all times, in accordance with the trust deed and general law.
This includes the need to meet the deadlines for reporting both to this office and to both members and pensioners.
3.2 It is pleasing to note that after three poor years of investment performance, schemes are in general reporting improved investment returns, which has had a general beneficial effect. The average investment return for schemes reporting their triennial results in this year has returned to a positive figure, which continues the positive trend mentioned in last year's report. It remains important however, to ensure that the reporting of the financial position of the scheme and the security of benefits is clearly explained for the benefit of members and pensioners.
3.3 It continues to be a concern that there are a few defined benefit schemes where employers are disinclined to make contributions "unnecessarily". There are currently no legislative requirements in respect of funding adequacy, so that, unless the trust deed governing the scheme has specific provisions, the level of funding is on the whole discretionary.
3.4 A pensioner mortality table based on recent Government Superannuation Fund experience has now been developed. A modified version of this is likely to be available to interested parties by the year end. This could provide a base pensioner mortality table for any annuity/pension market development. Currently the choice of providers for annuities (for example on the wind up of a superannuation scheme) has further reduced, with only one provider openly offering the product. It is hoped this trend will be reversed in time.
3.5 During the year I developed a checklist for actuarial reporting in conjunction with the NZ Society of Actuaries. It is pleasing to note that the industry is accepting this minor initiative which is of benefit to the actuary, the peer review process and to myself.
3.6 Last year I commented about the changed section of the Actuarial Standard for Superannuation which required the actuary to comment on the sufficiency of assets on wind up. An estimate of the cost of providing benefits by the purchase of annuities is required. However, it remains equally important to stress that any such insufficiency of assets identified would only eventuate on wind up.
3.7 Internationally there have been issues with unit pricing where the individual member's assets in a superannuation scheme may be identified by a number of units times a price of an individual unit. It is a complex area if an error is identified in the pricing and my office remains happy to discuss any such problems.
3.8 Paragraph 1(m) of the Second Schedule of the Act was inserted by the Superannuation Scheme Amendment Act 2004. The content was short, namely, "if any of the benefits payable for the scheme are based on the investment return of scheme assets, a statement of the crediting rate or rates applied during the year" is to be specified. The original proposal was put forward by the industry as a way of providing more meaningful information to members. Over the year we have seen a range of interpretations of these words. We have taken the view that the intention of the amendment was to provide meaningful information for specific members of specific schemes and have viewed the content of information provided to us accordingly.
3.9 After the close of the year I was advised of a case from the High Court which may be significant for Trustees of superannuation schemes concerning benefits when employees are dismissed or leave service to avoid dismissal. [ Dark v Weenink and Others HKAK CIV 2003 401 5846 11/08/05]
3.10 Recently the Review of Financial Products and Providers has been announced. The review of the Superannuation Schemes Act 1989 is expected to be included. It is to be hoped that this will give us the ability to finetune parts of the Superannuation Schemes Act. In particular this should include certain issues that previous government actuaries as well as myself have commented on. These include :-
- Consideration of minimum funding levels.
- Consideration of when an independent Trustee is justified
- Consideration whether there should always be a NZ resident director for a corporate trustee.
- Consideration of partial separation or ring fencing of the assets and liabilities of a Defined Benefit section of a scheme where there are significant numbers of Defined Contribution members.
- Review the changing requirements which follow the development of Master Trust products with participating employers. Greater reporting at the participating employer level needs investigation.
- Clarification of the definition of unallocated funding.
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