In order to understand the issues about superannuation that the Commission examined, it is necessary to explain briefly the obligations imposed on trustees of superannuation funds.
In addition to statutory obligations, important obligations are imposed on trustees by covenants under the SIS Act.
Section 52(1) of the SIS Act provides that the governing rules of an RSE are taken to contain certain covenants. Of particular relevance to the work of the Commission were the following covenants:
- to exercise, in relation to all matters affecting the entity, ‘the same degree of care, skill and diligence as a prudent superannuation trustee would exercise in relation to an entity’;
- to perform the trustee’s duties and exercise the trustee’s powers in the best interests of the beneficiaries;
- where there is a conflict of interests and duties:
- to give priority to the duties to and interests of the beneficiaries;
- to ensure that the duties to the beneficiaries are met;
- to ensure that the interests of the beneficiaries are not adversely affected; and
- to comply with the prudential standards in relation to conflicts;
- not to enter into any contract, or do anything else, that would prevent the trustee from, or hinder the trustee in, properly performing or exercising its functions or powers.
These covenants are central to the proper conduct of the trustee of an RSE. The trustee’s covenants are buttressed by the provision, in section 52A, that the governing rules of an RSE, of which the trustee is a body corporate, are to be taken to contain covenants by each director of the corporate trustee to parallel effect (obliging the director to exercise care, skill and diligence; perform duties and exercise powers in the best interests of beneficiaries; deal with conflicts in the same way as the trustee must; and not enter into any contract or do anything else that would prevent proper performance of duties or hinder exercise of powers).
In particular, eg, the obligations imposed on trustees who offer a MySuper product in ss 29VN and 29VO of the SIS Act. See also the proposed new Prudential Standards released by APRA on 13 December 2017 relating to member outcomes: APRA, Strengthening Superannuation Member Outcomes (13 December 2018) APRA <www.apra.gov.au/strengthening-superannuation-member-outcomes>.
The covenants, and obligations, imposed under the SIS Act are cumulative: SIS Act s 51A.
SIS Act s 52(2)(b).
SIS Act s 52(2)(c).
SIS Act s 52(2)(d).
SIS Act s 52(2)(h).