Superannuation funds need to be careful in ensuring that non-lapsing nominations (NLN) signed by their members are actually valid and consistent with the relevant legislation.
That is the bottom line of a recent determination handed down by the Superannuation Complaints Tribunal (SCT) (D16-17149) which saw the decision of a superannuation fund to strictly follow a deceased member’s NLN set aside and the death benefit, plus interest directed to the deceased’s son.
The SCT decided to set aside the NLN because it entailed a sister living in another country who could not be proved to have an interdependent relationship.
What is more, the superannuation fund was told that it had to pay the son irrespective of any benefit it had already paid to the deceased member’s sister.
The SCT determination held that the superannuation fund trustee could not reply upon the NLN because the sister did not actually fulfil the requirements of the Superannuation Industry (Supervision) Act with respect to being interdependent.
It found that because the sister and the deceased lived in different countries and therefore did not “live together” meant that a key section of the Act 10A (1)(b) was unable to be fulfilled.
The SCT determination said that in the absence of having checked the validity of the NLN, it was “unfair and unreasonable of the trustee to accept it held a NLN in favour of the sister”.
“Instead, it should have dealt with the benefit as if it did not hold a NLN and paid the benefit to the legal personal representative (LPR) of the deceased,” the determination said.
