Superannuation as “deferred pay”

The High Court of Australia in Finch v Telstra Super Pty Ltd [2010] HCA 36 confirmed, citing  the Privy Council in {Air Jamaica Ltd v Charlton [1999] 1 WLR 1399 at 1407}, at [33] that superannuation is “deferred pay“:

“Employer superannuation is part of the remuneration of employees. …….Superannuation is not a matter of mere bounty, or potential enjoyment of another’s benefaction. It is something for which, in large measure, employees have exchanged value – their work and their contributions. It is “deferred pay.

The High Court of Australia in Byrnes v Kendle [2011] HCA 26 stated:

“Another relevant aspect is that the beneficiaries under a pension scheme are usually not volunteers, but have rights with contractual and commercial origins in their contracts of employment which they pay for by their service and contributions[157]. Another relevant aspect is common practice in the field of pension schemes generally, as evinced in the evidence of actuaries and textbooks by practitioners in the field[158]”

[157] Mettoy Pension Trustees Ltd v Evans [1990] 1 WLR 1587 at 1610; [1991] 2 All ER 513 at 537; Imperial Group Pension Trust Ltd v Imperial Tobacco Ltd [1991] 1 WLR 589 at 597; [1991] 2 All ER 597 at 605-606.

[158] Mettoy Pension Trustees Ltd v Evans [1990] 1 WLR 1587 at 1611; [1991] 2 All ER 513 at 537-538; Stevens v Bell [2002] EWCA Civ 672.

In Imperial Group Pension Trust Limited v Imperial Tobacco Ltd [1991] 1 W.L.R. 589, Brown-Wilkinson V-C stated:

“Pensions scheme trusts are of a quite different nature to traditional trusts. The traditional trust is one under which the settlor, by way of bounty, transfers property to trustees to be administered as objects of his bounty. Normally, there is no legal relationship between the parties apart from the trust. The beneficiaries have given no consideration for what they receive. The settlor, as donor, can impose such limits on his bounty as he chooses, including imposing a requirement that consent of himself or some other person shall be required to the exercise of the powers.

As the Court of Appeal have pointed out in Milenstedt v Barclays Bank International [1989] I.R.L.R. 522 a pension scheme is quite different. Pension benefits are part of the consideration which an employee receives in return for rendering his services. In many cases, including the present, membership of the pension scheme is a requirement of employment. In contributory schemes, such as this, the employee is himself bound to pay his or her contributions. Beneficiaries of the scheme, the members, far from being volunteers have given valuable consideration. The company employer, is not conferring a bounty.”

In Mettoy Pension Trustees Ltd v Evans [1990] 1 W.L.R. 1587 at 1610-1611, Warner J elaborated on the same theme:

“..beneficiaries under a pension scheme such as this are not volunteers.Their rights have contractual and commercial origins. They are derived from the contracts of employment of the members. The benefits under the scheme have been earned by the service of the members under those contracts and where the scheme is contributory, pro tanto by their contributions.”


Specifically in the superannuation context Bryson J {Dillon v Burns Philp Finance Ltd (1988) unreported decision of the Supreme Court of NSW, (BC8801719), 14}has noted:

“The parties’ relationship [ in a superannuation fund] is quite different to the relationship between beneficiaries and trustees who are administering a trust instrument which expresses the bounty of a settlor. … The context … is a contractual context in which an employee … and the employer adhere to the Plan as a set of rules to regulate part of their employment relationship. Superannuation rights are not granted out of grace or bounty and members contribute their own money.”

As Bryson J notes, the point of distinction between superannuation funds and trusts in general that is typically highlighted is the fact that members are typically not volunteers 1.That is, superannuation members have generally provided consideration to secure their participation in the trust. In Australia they are also not volunteers in the colloquial sense of the word; membership of a complying fund is more or less compulsory for adults in the workforce.


Mihlenstedt v Barclays Bank [1989] IRLR 522; Imperial Group Pension Trust v Imperial Tobacco [1991] 2 All ER 597. In Australia see Dillon v Burns Philp Finance Ltd above at n 26; Minehan v AGL Employees Superannuation Pty Ltd [1998] ACTSC 114; (1998) 134 ACTR 1; Telstra Super v Flegeltaub [2000] VSCA 180; (2000) 2 VR 276 at 286.

As the Wallis Committee noted:

“Compulsory contributions and tax assistance for superannuation … arguably combine to imply that government should provide greater regulatory assurance in relation to superannuation than would normally apply for market linked investments.” {Wallis, above at n 41, 193.}

facebooktwittergoogle_plusredditpinterestlinkedinmailby feather

This tab updated on 31 July 2015