Trustee fees and Trustee capital reserve

This update is to let you know about the decision of Retail Employees Superannuation Pty Limited ABN 39 001 987 739 (Rest) to establish its own capital reserve to address Government legislation that will come into effect from 1 January 2022.

What is Rest doing?

Rest has decided to charge modest new Trustee fees in order to build a reserve of its own capital that will be separate from the assets of the Fund. The Trustee fees will be paid from the existing Administration Reserve and will not increase the fees charged to members. Rest’s capital reserve should ensure it has adequate resources to meet potential liabilities that could arise in the future.

Rest will also have backup for unexpected liabilities through a guarantee that enables it to access further funds only if needed. This is to limit the size of the capital reserve and in turn minimise the fees charged to build it up. The guarantee arrangements will also be funded from the existing Administration Reserve.

It is important to note, these measures will not increase the fees charged to members and will therefore not have an impact on members’ account balances.

Why is Rest doing this?

Until now, Rest has not needed to hold capital to meet potential future liabilities, such as potential penalties. From 1 January 2022, legislative changes applying to all superannuation funds will limit the types of penalties and liabilities that trustees and their directors can pay from the assets of a fund. This means that superannuation fund trustees, particularly profit-to-member industry superannuation funds like Rest, have had to consider new measures to hold their own capital to meet potential liabilities.

As a result of these legislative changes, if Rest faced a liability that could not be paid from the Fund, such as a civil penalty, it could result in the Trustee becoming insolvent. This could prevent Rest from continuing as Trustee of the Fund.

Because of this, Rest considers that it is in the best interests of Rest members for Rest to have adequate resources to continue to act as Trustee of the Fund if it incurs a liability which cannot be paid from the reserves in the Fund.

Rest does not make any personal profit and it does not distribute profits to shareholders or pay dividends. Rest’s sponsoring organisations and shareholders do not profit from the Fund or Rest’s trusteeship.

The Trustee capital reserve: Important Details

Rest will initially charge a one-off Trustee fee of $10 million from the Administration Reserve, and then charge an ongoing Trustee fee of $3 million each year, in addition to existing Trustee costs.

The fees will be held in a Trustee capital reserve by Rest, separate from the assets of the Fund. The level of Trustee capital will be reviewed annually.

The Rest Constitution has been amended to provide that amounts held in the Trustee capital reserve cannot be paid to Rest’s shareholders as dividends, distributions or returns of capital. This is consistent with Rest’s status as a profit-to-member industry superannuation fund.

Rest will also enter into a capital support guarantee with a subsidiary of the Fund to provide additional capital support, initially up to $10 million, which Rest could call on if the capital generated from the fees is not sufficient to meet liabilities.

Rest will pay a fee to the subsidiary for providing the guarantee. If the guarantee is called, Rest will be required to repay amounts called with interest. The subsidiary will therefore earn a return for the Fund. Rest will pay the fee for the capital guarantee and any interest from its own resources.

When will these changes apply?

Rest expects to charge the one-off Trustee fee, and enter into the capital support guarantee by 1 January 2022. The ongoing Trustee fee will commence in the first quarter of 2022.

How will this impact Rest’s Administration Fees?

The Trustee fees and the capital guarantee arrangement will not result in an increase in the Administration Fees charged to member accounts.

Members are currently charged an Administration Fee of $1.50 per week plus 0.12% per annum (charged monthly). The percentage-based fee is capped at $300. Members in Acumen are charged an Administration Fee of between $0 and $1.60 per week plus from 0.0% to 0.65% per annum.

Rest currently considers that these Administration Fees are appropriate to cover Rest’s operating expenses and ensure there are adequate provisions in the Administration Reserve, even with the addition of the new Trustee fees.

The one-off $10 million Trustee fee (plus GST) paid from the Administration Reserve represents around 0.016% of Rest’s funds under management ($65.8 billion as at 30 June 2021), while the ongoing annual $3 million Trustee fee (plus GST) represents around 0.005%.

Do you need to do anything?

No, you don’t need to do anything.

In this Member Update, “the Fund” refers to the Retail Employees Superannuation Trust, which is the superannuation fund to which members’ superannuation contributions are paid, which invests members’ superannuation savings and from which superannuation benefits are paid. “Rest” refers to Retail Employees Superannuation Pty Limited, which is Trustee of the Fund.

Rest Super, Rest Corporate, Acumen and Rest Pension is offered through the Retail Employees Superannuation Trust ABN 62 653 671 394 (the Fund) by Retail Employees Superannuation Pty Limited ABN 39 001 987 739 AFSL 240003 (Rest) as trustee for the Fund.