The more frequently assets of a superannuation fund are valued to determine changes in value, the greater the risk of error.
Unless the trust deed of a superannuation fund contains a power to vary the value that must be applied, whether it is a crediting rate or unit price, the price as determined by the trust deed must be applied to the member accounts, including former member accounts. Any under payment, subject to the de minimis principle, must be compensated. Otherwise the trustee is in breach of trust in not paying the amount required to be paid by the trust deed. The trustee is not entitled to apply a materiality test.
Trustees will generally wish to apply a materiality test. To do this, the powers in the trust deed must permit this.
The trust deed may also need powers to allow for dealing with market volatility where assets cannot be accurately valued.
Disclosure also needs to be considered. Correction of amounts that are de minimis is not required. However, the exact scope of de minimis in the context of pricing errors is yet to be tested. It is something much less than a materiality test.
The revised 'Unit pricing: Guide to good practice', a joint ASIC and APRA guide which was updated in August 2008, recognises that for exited members there can be a fixed dollar minimum of up to $20 set before compensation is required. This contrasts with the original guide that did not recognise a fixed dollar minimum, although it did recognise that the trustee could consider whether it was consistent with the trustee's obligations to set a threshold or to differentiate between holders.
Both the original guide and the revised guide recognised a materiality test of 0.3%.
There is no consideration of the legal basis on which either a fixed dollar minimum or the 0.3% materiality test may be applied. Twenty dollars is not necessarily a de minimis amount. Also, de minimis is equally applicable to existing members as well as former members, although the threshold amount may differ.
Trustees need to ensure that they have appropriate powers in their trust deed. Otherwise, apart from a de minimis amount (in the proper legal sense), a trustee is not entitled to apply threshold levels in determining compensation. In addition, there should be a policy properly disclosed so that investors are on notice.
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