Members to foot bill for Cbus’ $23.5m fine in court-approved ASIC settlement

The Federal Court has blessed a $23.5m penalty owed by Cbus for claims processing failures but the money will ultimately come from member fees.

Former Deputy Prime Minister Wayne Swan. Picture: NewsWire / Martin Ollman

Members of superannuation giant Cbus will foot the bill over $23.5m in fines incurred by the Wayne Swan-chaired industry fund for taking too long to pay out death and disability claims.

The Federal Court approved penalty, announced on Tuesday, comes a year after the corporate cop sued the super fund’s trustee, United Super, over systemic failures in claims handling processes that impacted thousands of members.

In some cases, Cbus, which manages about $105bn in retirement savings, took more than a year to pay out death benefits or disability payments to some of the country’s most vulnerable people.

The $23.5m fine, and a further $32m in compensation to the 7400 affected members, will come from reserves the fund has accrued in recent years by clipping a portion of all members’ administration fees.

The fine was endorsed after Cbus and the Australian Securities and Investments Commission last month filed a statement of agreed facts and admissions with the Federal Court that included the fund admitting its failures left members unable to pay rent or make mortgage repayments, forcing them to ask for money from friends, family and strangers.

Cbus’ admissions come months after the fund fired back against the blockbuster lawsuit launched by the corporate regulator, where it labelled the allegations “vague and embarrassing”.

ASIC deputy chair Sarah Court on Tuesday said Cbus’ failures caused distress to people who were already in upsetting situations. “Thousands of Australians suffered real and avoidable harm because of long delays and systemic failures in the way Cbus handled important and sensitive insurance claims,” Ms Court said.

“When people were grieving the loss of a loved one or grappling with a life-altering injury, Cbus should have ensured timely and accurate decisions were made on their insurance claims.”

In a statement, Cbus apologised to members and said the penalty would be paid by the fund’s reserves. A spokesman for the fund confirmed to The Australian that these reserves were funded by member administration fees.

He said the fund did not anticipate it would need to raise fees as a result.

“Cbus has established reserves to pay the penalty imposed by the court and a provision for an expected penalty was made in our financial accounts,” the spokesman said.

According to an agreed position between Cbus and ASIC, and released by the Federal Court, Cbus’s trustee — United Super — agreed its conduct “caused financial and other harm”.

The Federal Court ordered Cbus to pay the fine within 28 days after declaring Cbus contravened the Corporations Act by failing to ensure death and disability claims were handled efficiently, honestly and fairly, and that the fund further breached the law by failing to report the matters to ASIC when it knew there was an issue.

Cbus only reported the claims delays after victims began going to the media with their horror stories.

The Australian revealed last November how the construction industry fund gave a grieving father the run-around for a year before paying out his son’s death benefit.

The scandal rocked the $4 trillion super industry, with claims delays emerging not only at Cbus but across numerous funds including the nation’s biggest fund, the $400bn AustralianSuper.

The superannuation industry heaped the blame on third-party administrator Link Group, which was acquired by Japanese giant MUFG last year.

On Tuesday, Justice O’Callaghan said Cbus trustee United Super was ultimately responsible for the outsourcing of material business activity and that the fund knew from at least 2022 that the administrator had not met agreed service levels in claims processing.

Cbus last month settled a dispute with MUFG over the claims failures that included an undisclosed financial component.

Originally published as Members to foot bill for Cbus’ $23.5m fine in court-approved ASIC settlement