Labor sets clock ticking on super funds after death payout scandal

Grieving family members would get faster access to the superannuation of deceased loved ones under mandatory standards the Albanese government plans to introduce if re-elected.

Financial Services Minister Stephen Jones on Tuesday flagged a raft of standards for the $4.1 trillion super industry, which has been under increased scrutiny since $94 billion construction industry fund Cbus admitted to lengthy delays in processing death and disability payments.

Stephen Jones says superannuation funds continue to fall short of “where we need to go”.Credit: Dominic Lorrimer

Cbus last year faced court action from the corporate watchdog, which alleged the fund failed to process more than 10,000 claims for death and disability payments in a timely manner, costing thousands of members a total of $20 million. Cbus at the time apologised for the delays in processing claims, acknowledged they had added to the distress of members and their families, and promised to do better.

Jones has put the industry on notice several times since 2022 that it risked further regulation if it didn’t improve services and support for members. He has given funds a year to improve service speeds and delivery before the proposed standards would come into force.

“I’ve given [super funds] a period of time to lift their service speed and whilst there have been improvements, we’re nowhere near where we need to go,” Jones said at a press conference.

“To their credit, some funds have moved, but not everyone has. We want to ensure that the 22 per cent of Australians who are in retirement by this time next year have the service and expectations that we set superannuation up for in the first place.”

Grieving widows and other family members have waited months, and sometimes more than a year, to be paid death benefits – a deceased person’s remaining super funds being paid to their nominated beneficiary such as a spouse or child.

Jones, who flagged other “critical” areas for improvement including fairer and more efficient processing of insurance claims and stronger communication between super funds and their members, said tardy death benefit processing remained the biggest problem.

Cbus is not the only super fund to come under fire recently.

Australian Securities and Investments Commission (ASIC) deputy chair Sarah Court in November said mistreatment of vulnerable customers was a systemic failure of the sector, highlighting widespread customer service failings on death and disability claims.

Following a multi-year project examining industry practices and compliance with laws, ASIC wrote to the chief executives of several funds, urging them to assess their death benefit claims-handling practices.

The nation’s biggest fund, AustralianSuper, announced last year it would repay $4.2 million to about 7000 people as compensation for taking too long to process death benefit claims.

ASIC will this year issue a public report with more detailed insights from its review of super fund websites.

Liberal senator Andrew Bragg said the mandatory standards announced by the government were a positive but small change that did not go to the heart of the problem.

“It’s a pimple on an elephant’s bottom and a tiny change in response to the Cbus fiasco,” he said.

“There’s nothing on board competency, the tenancy and independence of directors and inappropriate meddling by unions, including the rivers of gold that flow from super funds to unions.”

An independent review in December found Cbus failed to sufficiently demonstrate that its relationship with disgraced construction union the CFMEU was in the best financial interests of members.

Bragg said the Senate economics committee was looking into the “appalling standards” on the boards of some super funds, with an interim report due before the election.

“The mandatory standards don’t address the lack of experience and expertise on boards or the conflicts of interest,” he said.

Treasury will work with consumer advocates, regulators and industry stakeholders to develop the government’s proposed mandatory standards, with a draft to be released for public consultation.

Jones, who noted more than 20 per cent of Australians would be over retirement age by January next year, said the superannuation industry had significant work to do.

“The simple message to funds is we’ve just got to get better,” he said. “You’ve got to get better at the way that you’re dealing with your members.”

Accounting body CPA Australia said mandatory standards for the super sector were long overdue.

“Insurance and death benefits are key features of superannuation which have routinely been forgotten about,” CPA Australia superannuation lead Richard Webb said.

“This is a welcome reform to important and necessary features of superannuation in Australia.”

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