Regulators warn super funds on unlisted assets

APRA is taking a close look on the revaluation of super funds’ unlisted assets and discretionary spending practices.

Super funds are “under the microscope” according to an APRA executive.

The Australian Securities and Investments Commission has warned super funds not to blame third party administrators for problems in servicing their members, including processing death benefit claims.

Speaking at the annual conference of the Association of Superannuation Funds of Australia on Wednesday, ASIC Commissioner Simone Constant said trustees of super funds were responsible for the level of service they provided to their members, even if it was handled by outside administrators.

“However you arrange your service delivery, you are always accountable for your service delivery,” she told the audience of executives in the super fund industry.

“You are always accountable -- from trustee director through to your end member.”

She warned that ASIC was prepared to take action against super funds which were seen as having problems with insurance claims handling and other aspects of member services.

“It is our (ASIC’s) obligation to do all we can to enforce the law when boards of trustees do not meet (their obligations).”

Ms Constant was speaking following ASIC’s move last week to take action in the Federal Court against building industry super fund, the $94bn Cbus for delays in handling insurance payouts for members.

ASIC is suing Cbus, claiming that more than 10,000 members and claimants were adversely affected by delays of more than 90 days in the processing claims for death benefits and total and permanent disability insurance payments.

ASIC is taking civil penalties against the trustee of Cbus alleging that the super fund had “systemic” claims handling failures over a period from September 2022 to November 2024 and that it “failed to act efficiently, honestly, and fairly” in the handling of claims.

Cbus chair Wayne Swan blamed its superannuation fund administrator, Link Market Services, for the high level of complaints against the fund over member services- a claim which Link has rejected.

Speaking at the conference, Ms Constant delivered a strong message to super fund trustees that they had “end to end accountability” for their fund’s services to members.

Super funds commonly outsource their administration of member services and back office to a third party, with Link being the largest operator in the sector.

Ms Constant said there may be an even greater need for super fund trustees to have robust metrics for tracking the progress of their member insurance claims handling if the administration was outsourced.

“Circumstances may mean metrics and measurement (of claims handling) are even more important when third parties undertake operations on your behalf,” she told the conference.

She said super fund trustees could not outsource their responsibilities.

“Super fund leaders will be on the hook for certain responsibilities within their remit,” she warned.

Her comments come as both ASIC and prudential regulator Australian Prudential Regulation Authority, have warned that they will be cracking down on the superannuation sector over its handling of insurance claims.

ASIC has issued notices to 10 super funds requesting detailed information about their insurance claims handling processes with legal action expected against other super funds in the near future.

Ms Constant said super funds should see their members as customers, particularly when they needed more assistance and they moved into retirement or were making insurance claims.

She said super funds needed to track the process of handling an insurance claim from the moment the fund was told about a potential claim, such as the death of a member, and not just from when the claimant submitted the correct paperwork for their claim.

She said ASIC was concerned that the metrics used by super funds to track their processing of insurance claims were not good enough and did not “capture the real experiences of people out there dealing with loss.”

“We’re talking about husbands and wives, brothers and sisters, parents and children who need a way forward after the worst day of their lives.”

Ms Constant said ASIC and APRA were also working closely on the regulation of superfund investments in unlisted assets, particularly the valuation of the assets.

“APRA regulated funds allocate around 20 per cent of their portfolios, on average, to private assets,” she said.

“Some funds have announced plans to pull back from their space, but many say they intend to allocate more in future.”

She said ASIC expected that as super funds increased their exposure to unlisted assets, they needed to be focused on what this meant for their obligations to members and the market.

This included making sure the assets were appropriately valued and that risks in these investments were “clearly disclosed and communicated to members.”

APRA executive director, superannuation, Ms Carmen Beverley-Smith, said APRA was concerned about continuing issues over the valuation of unlisted assets held by super funds.

She said there was a “lack of clear triggers” on the revaluation of unlisted assets by some super fund trustees, with the valuation of unlisted assets, such as private equity and credit, property and infrastructure, not occurring often enough.

She said APRA was finalising a review of the asset valuation and liquidity management practices for a cross section of large and mid-size super funds which had significant exposure to unlisted assets.

“We expect to share those findings soon,” she said.

She said APRA believed there was significant room for improvement” by super funds in key areas such as how investments, spending and liquidity was managed, how their investments performed, and how well funds understood members’ needs.

“Superannuation is an industry under the microscope,” she said.

“With the industry continuing to expand and more Australians heading towards retirement, the need for trustees to address weaknesses and build resilience in their funds is becoming ever more urgent,” she said.

She said APRA was also taking a close look at how super funds spent their money.

She said there was a focus on their spending on discretionary items such as travel, entertainment and conferences.

“We do not intend to review every dollar spent but where an expenditure is reviewed, (but funds) can expect that we will seek information that demonstrates the expense was made in the best financial interests of their members,” she said.

Separately on Wednseday, The Australian Tax Office warned employers to pay the correct super entitlements on time after it ramped up its audits and reviews of employers.

ATO actions have led to $932m of previously unpaid superannuation reaching the retirement accounts of 797,000 employees in the past year.

Deputy Commissioner Emma Rosenzweig said that the latest super guarantee employer compliance figures reflect the ATO’s work to ensure the unscrupulous minority do not benefit at the expense of their employees.

“More than 92 per cent of superannuation entitlements are paid without the need for ATO intervention,’ said Ms Rosenzweig. “Sadly, we still receive referrals from employees reporting their super had not been paid.

“The ATO takes non-compliance with super guarantee obligations seriously, and ramped up the number of audits and reviews of employers.”

She said employers need to pay super in full, on time, and to the right fund, each quarter by the 28th day of October, January, April and July. From 1 July 2026, all employers will need to pay super at the same time as salary and wages.