Grandfathering employer super schemes 'not credible'

BY ROMY UDANGA

Last updated 05:00 04/08/2010

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A Government suggestion to force the closure of employer-based defined contribution superannuation plans is a "bombshell" and "not a credible option", according to a commercial lawyer specialising in superannuation.

The suggestion to "grandfather" employer-provided superannuation plans – keep them going without allowing new members to join – is tucked in the 200-page Securities Law Review discussion document issued in late June.

It also seeks to exempt the plans from the proposed governance regime covering collective investment schemes, including KiwiSaver.

Chapman Tripp partner Mike Woodbury said he would be disappointed if forced scheme closures were ever treated as a credible option.

He said the suggestion was made without supporting reasoning and "may be a deliberately extreme scenario put forward for the perfectly valid purpose of eliciting responses".

The Economic Development Ministry acknowledged in a separate paper that schemes where the employee benefit is defined at the outset are different and wouldn't fit under the revised governance regime.

The paper proposed exempting all employer-based superannuation schemes from the revised governance regime without requiring grandfathering provisions.

Mr Woodbury said defined benefit schemes, almost all of which are employer standalone schemes, should remain governed by the existing legislative framework and so, too, should other employer schemes.

He said the prevailing view was that the current legislative structure was working for standalone non-profit schemes.

Michael Chamberlain, principal of the work-based super scheme administrator Aventine, agrees employer-based and other non-profit super schemes should be exempt from the governance regime as they are not sold to the public.

He thinks the Government should go further and exempt all genuine work-based super schemes. "If it doesn't, it will see the end to work-placed superannuation as we know it." He said schemes should be governed under employment law.

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