By Brian Fallow
WELLINGTON - The Bank of New Zealand has won a long-running dispute with its staff superannuation scheme over the fund's $88 million surplus.
The Court of Appeal has upheld Justice Ellis' ruling in the High Court that the earnings generated by the fund's surplus are to replenish the surplus,
rather than sweetening the return the fund's 2800 members earn on their individual retirement savings.
It is likely to mean that the bank's "contribution holiday" will last indefinitely. Since 1990, the bank's subsidy to members' personal savings has been paid out of the fund's surplus, which is the difference between its assets and its liabilities. In 1990, most members of the Bank of New Zealand Officers Provident Association switched from a defined benefit (pension) scheme to a cash accumulation (lump sum) scheme.
For several years, until the bank decided it objected, the practice of the association's board of management was to take the fund's investment income, after tax and expenses, and apportion all of it to the fund's members, including earnings from the surplus. Even under that policy, the bank's contribution holiday would have lasted another 15 years. The bank argued that the policy was not warranted by the association's rules and did not square with the basic concept of a cash accumulation scheme, whose members could expect a return on their contributions and the employer's subsidy, but no more. The High Court agreed and now the Court of Appeal does too.
Association manager Tom Clark said yesterday the board would be consulting its lawyers before deciding what to do next, including weighing the prospects of an appeal to the Privy Council. The dispute has been wending its way through the judicial process since 1995. Earnings since November 1, 1995, have not been credited to members' accounts but put into an escrow account, which totalled $25.3 million at the last balance date, October 31, 1998.
Interested bystanders to the litigation include the Past and Present Members Action Committee, who contend that some of the remaining surplus should go to people who were members or pensioners in 1990. They contend that the 1990 restructuring of the scheme was unfair in not providing for the distribution of the surplus to members and pensioners then.
