Couple upset by Sovereign superannuation scheme closure

A couple have been left concerned about the governance of their retirement savings after Sovereign told them their scheme would be wound up. Photo/Getty Images.

A Kiwi couple have been left frustrated and worried about their superannuation savings after receiving a letter from provider Sovereign telling them their scheme will be closed and no longer overseen by a trustee.

But Sovereign - the country's largest life insurer - says the scheme's trust deed allowed it to be wound up with 30 days notice and the policy and its holder will still be protected under insurance law.

The husband, who does not wish to be named, received a letter from Sovereign dated August 25 telling him his Personal Superannuation Plan wound be wound up on September 30 because new legislation would significantly increase the cost of managing the plan.

"Winding up the Plan means it will no longer be a registered superannuation scheme, and as such is not subject to the additional governance of the trust deed with its lock in provisions," the letter stated.

The man said he and his wife had been contributing to superannuation products via Sovereign for 13 years and he questioned how the product could be changed "seemingly at will."

"I was very concerned that not enough information was provided on what is being lost, e.g. Governance or if there were implications for tax etc.

"We can't move our money without penalties so Sovereign get to choose what they'd like to keep and not. We won't be the only customers effected."

The man wrote back to Sovereign with his concerns and said even after receiving a second letter from the company he still felt they had not answered his core question of how they could change what he had signed up for so easily.

"I understand the actual investments are the same and will be managed the same but I bought a Superannuation Plan (with the governance, etc) which they clearly don't intend to deliver."

Len Elikhis, chief officer product for Sovereign, said it had followed the correct process for winding up a scheme.

"Under the terms of the Trust Deeds of the schemes, the trustee can decide to wind up the schemes at any time and give members 30 days' notice of its intention which is the process we have followed."

Elikhis said as a result of the change the trust deed would no longer apply but Sovereign would still be subject to the Insurance (Prudential Supervision) Act 2010.

"All changes we have made comply with this Act. This includes that in the event of conflict between interests of life policyholders and the interests of shareholders or members of a life insurer, the insurer must always give priority to the interests of the life policyholders."

A spokeswoman for Sovereign said if the man still had questions he was welcome to get back in touch.

She said the company was encouraging all members to seek advice from an authorised financial adviser to review their current investment goals and find alternative investment options where necessary.

Sovereign is winding up 12 superannuation schemes - four of which will see the money handed back to members. The other eight have transferred the policies into the names of the individual members.

The spokeswoman said it would not say how many members or how much money was involved as it was commercially sensitive.

A number of superannuation schemes have been wound up this year ahead of changes being brought in as part of the Financial Markets Conduct Act.

Schemes that continue to operate have to gain a managed fund licence by December 1.