Retirement income entities - preserved benefit paid before reaching their preservation age

Has regulation 6.18 of the Superannuation Industry (Supervision) Regulations (SISR) been complied with where a member of the superannuation fund was paid a preserved benefit before they were eligible to receive the payment?

No. The payment has not been made in accordance with regulation 6.18 of the SISR as the member of the fund was paid a preserved benefit before a condition of release was met.

The member had retired from full time employment.

The member had not attained their preservation age.

The trustees paid preserved benefits to the member relying on 'retirement' of the member as the condition of release.

There were no other conditions of release under which the member could request payment of their preserved benefits.

The conditions for the voluntary cashing of preserved benefits by a member of a regulated superannuation fund are set out in regulation 6.18 of the SISR. Subregulation 6.18(1) of the SISR provides that a member's preserved benefits in a regulated superannuation fund may only be cashed on or after the satisfaction of a condition of release. 'Conditions of release' are set out in Schedule 1 to the SISR. 'Retirement' is listed as a valid condition of release. 'Retirement' is defined under subregulation 6.01(7) of the SISR as: '(a) in the case of a person who has reached a preservation age that is less than 60 - if: (i) an arrangement under which the member was gainfully employed has come to an end; and (ii) the trustee is reasonably satisfied that the person intends never to again become gainfully employed, either on a full-time or a part-time basis....'

The member had not reached their preservation age and therefore did not satisfy a condition of release. The payment of preserved benefits to the member is otherwise than in accordance with subregulation 6.18(1) of SISR. As such this is a breach of an operating standard made for the purpose of subsection 31(1) of the Superannuation Industry (Supervision) Act 1993 (SISA) under subregulation 6.17(2). This subregulation makes it clear, among other things, that a member's benefits must not be paid except when the fund is required or permitted to pay them under Part 6 of the SISR. By paying the member's preserved benefits at an earlier time than is permitted under the SISR, the trustee will have committed an offence under subsection 34(2) of the SISA if the contravention was reckless or intentional.