Actuary wins on points in retirement payout stoush with CBA

A decision by the NSW Supreme Court has demonstrated the value of retirement planning from the earliest stages in the workforce. It might also have delivered a salutary lesson to senior bankers on how a usually bland piece of management speak can mean something of importance in a real-life situation - especially when used by a determined, experienced and well informed actuary negotiating his own employment contract.
 
In a case that has its genesis over 20 years ago, Peter Beck, an actuary whose position as managing director of CommInsure was terminated in 2005, won the right to have the trustees of the Officer's Superannuation Fund (the superannuation fund for CBA officers) give special consideration to paying him a defined benefit in the form of a pension based on his final salary of A$400,000, even though he had not reached the required 55 year age for early retirement.
 
The court agreed with Beck that amendments made to the former Colonial Group superannuation fund, which was ultimately taken over and absorbed into the Commonwealth Bank's fund, while drafted and adopted with well-intentioned reasons in mind, had the unintended consequence of depriving him of a valuable right.

Previously the trustee could be prevailed upon to favourably review a request for payment of a retirement benefit before the age of 55. This was deleted, apparently to comply with anti-age discrimination laws introduced in Victoria in the late 1990s.
 
The court agreed with Beck that there was no evidence that the changes had been reviewed by an actuary to ensure there were no unintended consequences, and that he wasn't made aware of the changes.
 
The Court heard how Beck had migrated with his family to Australia from South Africa in 1984, where he been employed by the Colonial Mutual Life Assurance Society since 1981. He effectively relocated his employment with Colonial Mutual to its Melbourne office, where he worked until 2000.
 
In July 2000 CBA acquired Colonial. As part of the takeover arrangements, Beck - by then a senior employee or "key hire" in the parlance of the time - was contacted by David Murray, then CEO of the Commonwealth Bank, to set up employment negotiations, reporting to CBA group executive John Mulcahy.
 
In subsequent discussions with Mulcahy and Les Cupper, another CBA senior executive, Beck consistently rejected any pay deal that did not include a larger base remuneration and a smaller incentive package, and openly stated it was because he wanted to accrue larger retirement benefits. He certainly wanted a deal that would leave him in an "enhanced" retirement position, compared to the one he had at Colonial.
 
In court, Mulcahy said he recalled saying to Beck words to the effect "you will be better off and certainly no worse off staying with the bank [CBA] than taking your redundancy payment and leaving."
 
So Beck agreed to sign on at CBA, and initially left his family in Melbourne, commuting to and from to Sydney to discharge his new employment duties with CBA. In the short term his superannuation benefits remained in the New Colonial Fund.

Some time later, he and his wife felt pressured to relocate themselves and their family to Sydney at great financial and emotional cost.
 
What Beck didn't realise during contract negotiations was that in 1998 an amended deed had deleted the trustees' discretion to award a pension to anyone who retired before 55, but who had demonstrated loyalty by a long period of service - a clause he had valued highly in his previous two super funds.
 
On 13 August 2004 Stuart Grimshaw, group executive, investment and insurance services for CBA told Beck that the bank intended to replace him as CEO of CommInsure with Simon Swanson, an executive from New Zealand. His last day was to be in mid-2005, when he would have been just 51 years old.
 
Beck asked to either be kept on the CBA payroll in another role - or even on leave without pay -  until he reached 55; or else to be supported in his bid to have the trustees of the fund pay him his entitlements as if he'd turned 55, on the basis of his length of service and that he had not resigned or had his employment terminated for cause.
 
CBA executives refused to countenance the first suggestion, and were initially supportive of the second option until the trustee refused, taking a legalistic approach. This sparked the ten-year battle that has now ended successfully for Beck - who apparently never lost sight of his retirement strategy.